The equity market is expected to tread on uncertain paths in the near term due to various factors such as rate hikes by the RBI and other global central banks, spiralling inflation, and persistent selling by FPIs.

In such a situation, investors need to be cautious and focus primarily on the large-cap segment. Large-cap Funds are considered to be relatively safer than their mid and small-cap peers that carry a greater degree of risk. The biggest advantage of having a Large-cap Fund in your portfolio is the stability it offers to your portfolio. Thus, investment in Large-cap Funds can prove to be especially rewarding in highly volatile conditions.

Mirae Asset Large Cap Fund is a process-driven Large-cap Fund that focuses on diversification to reward long-term investors with reasonable risk-adjusted returns.

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

Past performance is not an indicator of future returns
Data as on May 31, 2022
(Source: ACE MF)  

Launched in April 2008, Mirae Asset Large Cap Fund aims to invest in high-quality large-sized companies available at a reasonable price. The fund holds a spectacular long-term performance track record that speaks for its success. Mirae Asset Large Cap Fund has come a long way, rewarding investors, despite going through multiple changes in its investment mandate. While the fund showed below-average performance in the market crash of 2020, in the ensuing bull phase, it stood among the top performers in the category. The prudent investment strategies followed by the fund have earned it the tag of being a consistent performer that has rewarded long-term investors well across various market phases. Over the last 5 years, Mirae Asset Large Cap Fund has appreciated at a CAGR of around 13%, which is slightly higher than the 12.5% CAGR delivered by the current benchmark Nifty 100 – TRI index. An investment of Rs 10,000 in Mirae Asset Large Cap Fund five years ago would now have appreciated to Rs 18,450.

Table: Mirae Asset Large 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
Canara Rob Bluechip Equity Fund	6,718	6.21	29.92	16.63	14.76	13.33	19.98	0.19
IDBI India Top 100 Equity Fund	574	9.86	33.19	16.38	11.51	10.92	20.95	0.18
Kotak Bluechip Fund	4,162	7.46	33.37	15.01	12.65	12.02	22.07	0.16
Mahindra Manulife Large Cap Pragati Yojana	153	7.45	32.74	14.88	—	—	21.32	0.16
UTI Mastershare	9,674	7.69	32.07	14.46	12.51	11.14	21.33	0.16
Baroda BNP Paribas Large Cap Fund	1,281	7.25	28.05	14.27	12.24	11.16	19.75	0.16
ICICI Pru Bluechip Fund	31,235	11.13	33.21	14.07	12.77	12.41	21.91	0.15
Invesco India Largecap Fund	602	8.31	29.73	13.67	12.25	11.63	21.53	0.15
Mirae Asset Large Cap Fund	31,722	8.40	32.93	13.59	13.02	13.57	22.22	0.14
Edelweiss Large Cap Fund	325	6.98	31.56	13.52	12.96	10.96	21.37	0.15
NIFTY 100 – TRI		7.56	32.53	13.08	12.50	11.61	22.34	0.14

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 31, 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.

Mirae Asset Large Cap Fund has constantly ranked among the list of top quartile performers across various time periods in the past, irrespective of the investment mandate it followed. In the last 1-year, the fund outpaced its benchmark by around 1 percentage point, while in the last 2-year and 3-year period, its performance is nearly in line with the index. Over longer time periods of 5 years and 7 years, the fund has generated a decent lead over the benchmark. Moreover, Mirae Asset Large Cap Fund has outpaced the large-cap category average across time frames even when most of its large-cap peers failed to keep pace with the benchmark.

With a Standard Deviation of 22.22%, Mirae Asset Large Cap Fund’s volatility is nearly in line with the benchmark. Moreover, the Sharpe Ratio of the fund is nearly in line with the category average and benchmark. Its ability to deliver reasonable risk-adjusted returns while limiting the downside risk differentiates the fund from the rest.

Investment strategy of Mirae Asset Large Cap Fund

Mirae Asset Large Cap Fund is mandated to invest at least 80% of its assets in large-cap stocks (i.e., top 100 companies by market capitalisation). It aims to combine the consistency of large-caps with a few high conviction mid-cap ideas (up to 20% of its assets). It has the flexibility to invest across sectors and themes.

Mirae Asset Large Cap Fund follows a combination of the top-down and bottom-up approach to stock picking and endeavours to invest in companies that have a chance of benefiting from economic growth and structural changes happening in the country. The investment approach of the fund is centered around participating in high-quality businesses up to a reasonable price and holding the same over an extended period of time. The scheme tries to identify companies that have sustainable competitive advantages i.e. stocks that have strong pricing power and are sector leaders.

Aiming to outperform the benchmark, the fund managers follow a rigorous investment process that leads to alpha generation. Mirae Asset Large Cap Fund has a tendency to vary its investment strategies depending on various external factors. It resists following any market momentum and stays fully invested most of the time.

Graph 2: Top portfolio holdings in Mirae Asset Large Cap Fund

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

Mirae Asset Large Cap Fund invests in a well-diversified portfolio of about 50-65 stocks. As of April 30, 2022, the fund held 63 stocks in its portfolio. Its major exposure is in highly liquid large-cap names like HDFC Bank, ICICI Bank, Infosys, Reliance Industries, and Axis Bank, that collectively account for around 37.2% of its assets. SBI, HUL, Bharti Airtel, TCS, and Sun Pharma are among the other top holdings in the fund’s portfolio. Most of these names have been prominent candidates in the fund’s portfolio for well over 2 years now.

In the last one year, Mirae Asset Large Cap Fund has benefited from its prominent holdings in stocks like Reliance Industries, ICICI Bank, Infosys, Bharti Airtel, and SBI. Titan Company, Bharat Electronics, TCS, Indian Energy Exchange, etc., stood among other top gainers in the portfolio.

In terms of sector, over one-third of the fund’s portfolio is currently skewed towards Banking and Finance stocks, followed by Infotech, Petroleum Products, Consumption, and Pharma, together accounting for another 36.3% of the portfolio. The remaining portion of the fund’s portfolio is diversified across a range of sectors like Auto, Engineering, Consumer Durables, Telecom, Cement, Power, among others.

Suitability

Mirae Asset Large Cap Fund holds a well-diversified portfolio spread across stocks and sectors, which helps it efficiently deal with market fluctuations. This bodes well with the large-cap allocation, which further increases the stability of the portfolio and performance.

The fund is nimble in its approach and has a history of taking timely sector bets. The cyclical bets taken by the fund manager have helped increase the return generated by the fund during economic recoveries, whereas the allocation to defensives helps tackle the volatility and limit downsides.

This makes Mirae Asset Large Cap Fund suitable for investors seeking a well-managed and relatively stable large-cap fund for long-term wealth creation.

This article first appeared on PersonalFN here