Investing in Large & Midcap Funds is an excellent choice for investors looking for diversification in large-cap stocks and mid-cap stocks through a single fund. Large-cap stocks are known to provide steady returns, while mid-cap stocks have the potential to generate high returns. A combination of these stocks in the portfolio can help you to earn optimal risk-adjusted returns.

Thus, the category is suitable for investors who prefer the stability of large-caps, but are willing to take slightly higher risks to boost their returns.

In the current market environment where the volatility has intensified, Large & Midcap Funds can prove to be resilient compared to riskier categories such as Midcap Funds and Small-cap Funds. Moreover, the category is well-placed to take advantage of a subsequent recovery and create wealth for investors over the long term.

Mirae Asset Emerging Bluechip Fund is the most popular scheme in the Large & Midcap Funds category that has rewarded its investors well, yet without taking unnecessary risk.

Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Emerging Bluechip Fund 5 years ago

Graph 1

Data as on February 15, 2022
(Source: ACE MF) 

Mirae Asset Emerging Bluechip Fund is a Large & Midcap Fund that combines the stability of large caps along with the growth potential of select emerging mid-sized companies that have the potential to become future bluechips. The fund managers look for high growth-oriented stocks across the large-cap and mid-cap segments that are available at fair and attractive valuations. This approach has helped Mirae Asset Emerging Bluechip Fund establish itself in the Large & Midcap category and became popular among investors resulting in a massive growth in AUM. In order to put a check on capacity, the fund house suspended lump sum investments in the scheme since October 2016 (when its corpus was around Rs 3,000 crore) and has currently restricted fresh registrations via SIP to Rs 2,500 per month. The well-constructed portfolio has ensured that risk is kept well within limits without compromising on long-term wealth creation. Over the last 5-year period, Mirae Asset Emerging Bluechip Fund generated returns at a CAGR of 20.5%, thus outperforming the benchmark Nifty LargeMidcap 250 index by around 4 percentage points.

Table: Mirae Asset Emerging Bluechip Fund’s performance vis-a-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
Quant Large & Mid Cap Fund 50 36.55 33.48 27.57 15.98 16.36 21.16 0.27
Axis Growth Opp Fund 5,735 27.36 28.20 27.30 18.76 0.34
Mirae Asset Emerging Bluechip Fund 22,097 21.00 29.21 27.09 20.54 19.52 22.05 0.29
Canara Rob Emerg Equities Fund 12,548 21.96 25.56 24.41 18.92 16.88 21.40 0.27
Edelweiss Large & Mid Cap Fund 1,164 20.13 24.44 23.23 18.27 13.36 20.50 0.26
ICICI Pru Large & Mid Cap Fund 3,824 29.43 27.01 22.79 14.84 12.41 23.41 0.23
Aditya Birla SL Equity Advantage Fund 6,031 19.38 22.51 22.67 14.58 13.22 23.41 0.23
LIC MF Large & Midcap Fund 1,601 25.32 21.46 22.59 17.20 19.76 0.26
Navi Large & Midcap Fund 145 28.68 24.35 22.47 16.04 22.04 0.24
Kotak Equity Opp Fund 8,940 20.43 21.96 22.42 16.50 14.10 20.94 0.25
Nifty LargeMidcap 250 Index – TRI 21.42 25.44 21.88 16.60 13.61 22.80 0.23

Returns are point to point and in %, calculated using Direct Plan – Growth Option. Those depicted over 1-Yr are compounded annualised.
Data as on February 15, 2022
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator of future returns. The percentage returns shown are only for indicative purposes.

As far as performances go, Mirae Asset Emerging Bluechip Fund has achieved a commendable track record in a short span of time and successfully delivered superior returns across market cycles. Its outperformance and the ability to generate higher alpha is clearly visible across time periods considered. Mirae Asset Emerging Bluechip Fund’s long term track record is exemplary; wherein it has generated compounded annualised alpha of 4 to 6 percentage points over its benchmark Nifty LargeMidcap 250 – TRI. At the same time, it has outpaced most of its peers by a distinct margin. Even the short term track record of the fund is quite encouraging.

Mirae Asset Emerging Bluechip Fund’s volatility (standard deviation) of 22.05% is competitive to its peers and nearly in line with the benchmark, and more than compensates its investors in the form of superior risk-adjusted returns. The Sharpe ratio (0.29) of the fund is commendable and is among the highest in the category.

Investment strategy of Mirae Asset Emerging Bluechip Fund

Mirae Asset Emerging Bluechip Fund was incepted as a mid-cap biased fund that also held a significant allocation to large-cap stocks. Now classified under Large & Midcap Funds category, the fund is mandated to invest 35% to 65% of its assets in stocks of mid-cap companies (that are not part of the top 100 stocks but fall within top 250 stocks as per market capitalization at the time of investment). In addition, it also invests 35%-65% of its assets in stocks of large-cap companies (top 100 stocks by market capitalization at the time of investment).

While picking stocks for the portfolio, Mirae Asset Emerging Bluechip Fund aims to hold a well-diversified portfolio without having any bias towards any particular theme, sector, or style. Following a combination of the top-down and bottom-up approaches to investing, the fund management broadly analyses the macro economy and invest in stocks of high-growth companies likely to benefit from macroeconomic, sectoral, and industry trends. The fund manager identifies long-term investment opportunities in stocks of high quality businesses that are available at reasonable prices and follows a buy-and-hold investment strategy until its full potential is derived. Notably, the turnover ratio of the fund has ranged between 70%-95%.

Graph 2: Top portfolio holdings Mirae Asset Emerging BluechipFund

Holding in (%) as of January 31, 2022
(Source: ACE MF) 

As of January 31, 2022, Mirae Asset Emerging Bluechip Fund held 69 stocks in its portfolio spread across market capitalization, with prominent large-cap names, such as ICICI Bank, HDFC Bank, Infosys, Axis Bank, SBI, appearing among its top holdings. Notably, 4 out of its top 5 holdings are bank stocks. The top 10 stocks in the portfolio combined, accounts for around 38.4% of the total assets. Some of its top stocks have been in the portfolio for well over 2 years now. The fund currently holds a long tail of around 26 stocks with an exposure of less than 1% in each stock.

ICICI Bank, Indian Energy Exchange, SBI, Infosys have been the major gainers in the portfolio together contributing over 10% to its returns in the last one year. It also benefitted from its holdings in SKF India, Cholamandalam Investment and Finance, Bharti Airtel, Bharat Electronics, among others that turned out be the major gainers in the portfolio.

While Mirae Asset Emerging Bluechip Fund’s portfolio is skewed towards cyclicals, it is fairly spread across defensive and sensitive sectors as well. Banks dominate Mirae Asset Emerging Bluechip Fund’s portfolio with an allocation of 20.3%, while Finance stocks account for another 11.3% in the portfolio. Infotech, Auto & Auto Ancillaries, Pharmaceuticals, Engineering, Consumption, and Consumer Durables are among the top sectors in the portfolio. The fund’s portfolio appears well positioned to ride the market highs and lows.

Suitability

Mirae Asset Emerging Bluechip Fund is a process-driven fund and has been agile enough to take advantage of various investment opportunities present in the mid-cap as well as large-cap segment. It aims to invest in growth-oriented stocks while simultaneously keeping an eye on valuations.

The fund adopts a well-balanced approach to investing. It does not resort to take aggressive calls, but maintains a diversified portfolio of quality stocks that are expected to benefit from macroeconomic, industry, and sectoral trends, and holds them with a long term view. This strategy of the fund house has enabled it to perform consistently across market cycles, while keeping the overall risk low. Mirae Asset Emerging Bluechip Fund has an experienced fund manager, Mr Neelesh Surana, at helm since inception. He has been successful in steering the fund out of rough market situations.

The aggressive investment mandate along with higher allocation to mid and small-caps makes Mirae Asset Emerging Bluechip Fund suitable for investors having higher risk appetite and looking to gradually invest (via SIP) in a reliable fund capable of creating superior wealth for its investors.

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

This article first appeared on PersonalFN here


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