The Russia-Ukraine conflict caused the S&P BSE Sensex to drop by around 5% in the last one month. However, during weak and volatile market trends, Large-cap Funds are relatively safer bets. This is because these funds invest in well-established businesses that can record strong earnings growth even when economic conditions look bleak.

While the returns generated by stocks of these companies may not be very high, they are well capable of containing downside risk during a volatile market environment as compared to smaller-sized peers. Investment in Large-cap Funds can offer you steady growth of capital over the long term at a moderately-high risk level. This makes Large-cap Funds suitable for investors who do not want to take very high-risk investments such as Mid-cap Fund and Large-cap Funds.

Canara Robeco Bluechip Equity Fund is one such Large-cap Fund that has showcased its high growth potential and clearly outpaced its giant-sized peers over the last few years.

Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Bluechip Equity Fund 5 years ago

Past performance is not an indicator of future returns
Data as on March 08, 2022
(Source: ACE MF)  

Launched over a decade back in August 2010, Canara Robeco Bluechip Equity Fund is a relatively small-sized Large-cap Fund. The fund has shown a complete turnaround performance in the last few years and registered an extraordinary phase to make it to the list of category outperformers. Notably, the fund’s corpus has trebled in the last one year to Rs 6,020 crore, backed by its superior performance in the last couple of years. Its strategy of sticking to index heavy weights that have been driving the index has worked in its favour and paid-off investors with superior returns. In the market crash of 2020, the fund managed to limit the downside, generating alpha of over 7.5 percentage points when compared to the index, while it has also done reasonably well in the current bull phase. Over the last 5 years, Canara Robeco Bluechip Equity Fund has registered a compounded annualised return of around 16.1%, as against 13.5% CAGR delivered by its benchmark S&P BSE 100 – TRI index.

Table: Canara Robeco Bluechip Equity 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
Canara Rob Bluechip Equity Fund	6,020	7.36	21.29	18.48	16.14	11.91	19.31	0.25
IDBI India Top 100 Equity Fund	561	13.26	23.35	18.08	13.37	9.90	20.22	0.24
Axis Bluechip Fund	34,182	7.04	16.47	16.80	17.30	12.11	18.14	0.22
BNP Paribas Large Cap Fund	1,254	6.90	19.17	16.69	14.13	10.34	19.13	0.23
UTI Mastershare	9,659	10.10	21.97	15.80	13.66	9.87	20.60	0.21
ICICI PruBluechip Fund	31,272	11.00	23.58	15.15	13.54	11.04	21.40	0.20
SBI BlueChip Fund	31,570	5.19	21.66	15.03	12.36	10.67	22.18	0.19
Mirae Asset Large Cap Fund	31,297	8.21	21.03	14.85	14.31	12.34	21.70	0.19
Aditya Birla SL Frontline Equity Fund	21,791	9.49	21.77	13.91	11.77	9.87	21.88	0.18
HDFC Top 100 Fund	21,405	8.59	22.36	11.69	11.46	9.45	23.79	0.14
S&P BSE 100 – TRI		8.59	22.57	14.51	13.51	10.16	21.97	0.18

Returns are point to point and in %, calculated using Direct Plan-Growth Option. Those depicted over 1-Yr are compounded annualised.
Data as on March 08, 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.

Canara Robeco Bluechip Equity Fund holds a superior performance track record and has constantly figured among top quartile performers in its category. The recent boost in performance has helped the fund achieve a mark of significantly outpacing the benchmark and its prominent category peers across time periods. The returns generated by Canara Robeco Bluechip Equity Fund over the 3-year to 7-year period have been far better than the benchmark, during which it managed to generate alpha at a CAGR of about 2 to 4 percentage points.

This outperformance has come at a far reasonable risk when compared to the benchmark and category average. The fund’s Standard Deviation (19.31%, annualised) is much lower than its benchmark (21.97%) as well as the category average (20.87%). Its risk-adjusted returns (as denoted by the Sharpe ratio) outpaces that of its benchmark as well as the category average by a noticeable margin.

Investment strategy of Canara Robeco Bluechip Equity Fund

Categorised under large-cap funds, Canara Robeco Bluechip Equity Fund is mandated to invest a minimum of 80% of its assets in large-cap stocks. Accordingly, it focuses on bluechip companies and invests in stocks of companies figuring in the list of top 100 companies based on market capitalisation. While selecting stocks for the portfolio, the fund focuses on companies and sectors that are expected to perform better than the general market and uses inputs from the internal quant model to identify investable companies. The fund follows a blended style of investing i.e. it looks for high-growth stocks available at fair valuation and stays invested for a long term.

While building a portfolio, Canara Robeco Bluechip Equity Fund follows a 3 Step investment process designed to achieve the investment objective in a disciplined manner, where step 1 is idea generation from the investment universe, followed by step 2 – screening process to shortlist investible ideas, while finalising the portfolio in the step 3. In the screening process the fund manager gives weightage to competent management, robust business fundamentals and reasonable valuations.

The fund manager aims to invest in large-sized companies with an established business presence, good reputation, and solid brand equity. Canara Robeco Bluechip Equity Fund usually holds about 45-50 stocks in its portfolio and follows a buy-and-hold investment strategy, which reflects the strong long-term conviction the fund management has when it picks stocks for the portfolio. The fund had a reasonable turnover ratio in the range of 35-50% in the last one year.

Graph 2: Top portfolio holdings of Canara Robeco Bluechip Equity Fund

Holding in (%) as of February 28, 2022
(Source: ACE MF)  

As of February 28, 2022, Canara Robeco Bluechip Equity Fund held 48 stocks in its portfolio spread across sectors. The top 10 stock holdings accounted for about 56.6% of the portfolio. Index heavyweights like Infosys, ICICI Bank, HDFC Bank, Reliance Industries, and TCS currently find a place in the top 5 portfolio holdings. SBI, Bajaj Finance, L&T, Axis Bank, HDFC Ltd., etc. are among other stocks that have found a place in the fund’s core holdings.

Canara Robeco Bluechip Equity Fund’s bet on Infosys, ICICI Bank, Bajaj Finance, SBI, Tata Steel, and L&T has turned out to be rewarding for the fund in the last 1 year. Titan Company, Mphasis, TCS, Reliance Industries, HCL Technologies, Bharti Airtel, and Avenue Supermarts were among the other stocks that contributed to its gains.

Among sector holdings, Canara Robeco Bluechip Equity Fund’s portfolio is majorly exposed to Banking and Finance, having a combined allocation of close to 35.7%. Infotech, Petroleum, Consumption, Auto, and Pharma have been the other prominent sectors in the portfolio with an exposure of about 5% to 16% in each, along with diversification to Engineering, Cement, Telecom, Consumer Durables, Retail, among others. The top 5 sectors in Canara Robeco Bluechip Equity Fund’s portfolio together account for around 66.4% of its assets.

Suitability

Canara Robeco Bluechip Equity Fund has evolved in terms of performance in the last few years by distinctly outperforming the benchmark as well as most of its large-sized peers even in depressed market conditions. The fund appears to be well-placed in its portfolio management strategies. Backed by a well-defined investment process and, the fund has the ability to timely pick quality names having high growth potential, and deliver market-beating returns in the long run.

Canara as a mutual fund house employs sound risk management techniques and has been efficient in managing the downside risk across schemes. Accordingly, Canara Robeco Bluechip Equity Fund has stood strong in bear market phases, and the fund managers have done well to limit losses in the past. The fund’s prudent risk management strategies can help it deal with the market volatility going ahead.

Canara Robeco Bluechip Equity Fund is suitable for long-term investors looking to earn decent alpha and benefit from the stability of large caps with an investment horizon of at least 3-5 years.

This article first appeared on PersonalFN here