The equity market has been witnessing high volatility over the past couple of months due to the Russia-Ukraine war and the resultant inflationary pressure. To navigate uncertain and volatile market conditions, you can consider diversifying your investments across market caps, preferably through a Flexi-cap Fund. This will help you reduce the portfolio risk, thereby maximising portfolio returns over the long term.

The flexible investment mandate of Flexi-cap Funds gives fund managers greater scope to identify alpha-generating opportunities from a large universe of stocks which can reward investors with superior risk-adjusted returns over the long term.

Canara Robeco Flexi Cap Fund is an actively managed Flexi-cap fund that has rewarded investors with handsome gains over the complete cycle.

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

Graph 1

Past performance is not an indicator of future returns
Data as on May 10, 2022
(Source: ACE MF) 

Canara Robeco Flexi Cap Fund is a Flexi style fund that holds a mandate to invest in a dynamic mix of equities across market caps, viz. large-cap, mid-cap, and small-cap stocks. In the last few years, the fund’s large-cap orientation and focus on index heavyweights have helped it do well during both upside and downside markets. Canara Robeco Flexi Cap Fund has consistently managed to generate superior risk-adjusted returns for its investors. With a CAGR of around 14% in the last 5 years, Canara Robeco Flexi Cap Fund has outperformed the benchmark S&P BSE 500 – TRI by a compounded annualised return of nearly 2 percentage points. An investment of Rs 10,000 in the fund 5 years back would now be worth Rs 19,281, as against a valuation of Rs 17,853 for a simultaneous investment in the broader index. Notably, the fund trailed the index during the initial year of this period while managing to catch up only in the last few years. The superior stock picking ability has driven the performance of the fund, helping it find a spot among top category performers.

Table: Canara Robeco Flexi Cap Fund’s performance vis-á-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
Quant Flexi Cap Fund 311 15.31 57.61 30.21 17.25 18.93 25.06 0.31
PGIM India Flexi Cap Fund 4,180 9.82 43.67 24.37 15.49 15.17 23.07 0.27
Parag Parikh Flexi Cap Fund 21,907 12.58 40.28 23.70 18.55 16.45 19.66 0.30
UTI Flexi Cap Fund 24,649 4.22 34.95 18.12 14.30 12.87 22.01 0.21
Union Flexi Cap Fund 1,045 12.92 35.49 18.11 12.69 10.82 21.31 0.21
IDBI Flexi Cap Fund 381 14.25 34.71 17.70 11.79 11.45 20.45 0.21
Canara Rob Flexi Cap Fund 7,285 10.16 31.96 17.60 14.02 13.03 20.03 0.21
DSP Flexi Cap Fund 7,538 3.61 31.02 16.33 11.71 12.89 22.07 0.19
Franklin India Flexi Cap Fund 9,744 13.19 41.90 16.12 11.53 12.04 23.84 0.17
JM Flexicap Fund 193 10.88 34.08 16.02 11.45 13.48 21.67 0.19
S&P BSE 500 – TRI 10.76 37.18 15.94 12.28 12.35 22.58 0.18

Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on May 10, 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 for future returns. The percentage returns shown are only for indicative purposes.

Canara Robeco Flexi Cap Fund has managed to generate a decent lead over the benchmark and the category peers across longer time periods. In the last 3-year and 5-year periods, the fund’s value has appreciated at 17.6% CAGR and 14% CAGR, respectively. The turnaround performance recorded in the last few years has helped improve its overall performance track record. In the last 1-year period, its performance has been nearly in line with the category average, while it also stands strong against its popular category peers during this period.

Canara Robeco Flexi Cap Fund has fared well on risk-return parameters as well. With a Standard Deviation of 20.03%, the fund has encountered much lower volatility when compared to many of its peers and the benchmark. Its Sharpe ratio (0.21) ranks among the highest in the Flexi-cap fund category, denoting its ability to generate superior risk-adjusted returns.

Investment strategy of Canara Robeco Flexi Cap Fund

Canara Robeco Flexi Cap Fund is classified under Flexi-cap Funds that are mandated to hold a minimum of 65% of their assets in equity and equity-related instruments with the flexibility to dynamically allocate assets across market caps without any limit or restriction. It is a market-cap agnostic fund focused on large-caps with few high conviction mid-cap and small-cap ideas. It is positioned as an “All Season Fund” with exposure to industries across market capitalization to remain exposed to lesser volatility compared to other sector funds. The fund aims to provide an investment opportunity in the “Best in Class” Indian companies with sustainable business models based on the ‘Top-down’ and the ‘Bottom-up’ approach to stock picking with a focus on high growth-oriented stocks available at a reasonable valuation.

While evaluating companies, the fund manager gives importance to qualitative features, management, and governance. They also look at quantitative parameters by analyzing the balance sheet and use valuation to determine the underweight/overweight position. The core focus of the fund remains on cash flow generating businesses. Canara Robeco Flexi Cap Fund holds a pre-dominant large-cap biased portfolio, where it invests around 70% of its asset, with the remaining in mid and small-caps. Focusing on long-term growth, the fund follows a buy-and-hold investment strategy until the full potential of its holdings is derived.

Graph 2: Top portfolio holdings in Canara Robeco Flexi Cap Fund

Holding in (%) as of April 30, 2022
(Source: ACE MF) 

Canara Robeco Flexi Cap Fund usually holds a well-diversified portfolio of stocks spread across market caps but with a large-cap bias. As of April 30, 2022, the fund held 54 stocks in the portfolio. The top 10 stock holdings in the portfolio accounted for nearly 45% of the total assets. Large-cap names like ICICI Bank, Reliance Industries, HDFC Bank, Infosys, Bajaj Finance, TCS, SBI, and Axis Bank appear among the list of its top portfolio holdings. Most of these stocks have been a part of the fund’s core holding for over 2 years now.

In the last one year, Canara Robeco Flexi Cap Fund has benefited the most from its holding in ICICI Bank, Reliance Industries, TCI Express, SBI, and Infosys, among others which have turned out to be major contributors to its returns, while it lost some value in stocks like HDFC Ltd., Max Financial Services, HDFC Bank, Gujarat Gas, etc.

Around 30.9% of the fund’s portfolio is concentrated to the Banking and Finance sector, followed by Infotech, Engineering, Petroleum, Consumption, and Pharma. It also has substantial exposure to Chemicals, Cement, Auto & Auto Ancillaries, and Telecom having an allocation in the range of around 2% to 3% of its assets. The top 10 sectors together occupied about 79.4% of Canara Robeco Flexi Cap Fund’s portfolio. While the fund’s portfolio is biased towards cyclicals, it holds substantial exposure to sensitive and defensive sectors as well.

Suitability

Canara Robeco Flexi Cap Fund maintains a well-diversified portfolio of quality stocks with a long-term view. Despite being an aggressive growth-oriented fund, the fund manager avoids taking momentum bets and focuses on quality stocks with solid growth potential in the long run.

Canara Robeco Mutual Fund is a process-driven fund house that employs sound risk management techniques. This has helped the fund do well to curb the downside risk even during depressed conditions such as the market crash of 2020. Moreover, the performance during the upside market has been in line with that of the benchmark.

Canara Robeco Flexi Cap Fund is suitable for investors having a high risk appetite, looking for capital appreciation through diversification across market capsover a long-term investment horizon of at least 5 years.

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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