Large & Midcap Funds offer you the opportunity to create wealth by diversifying your portfolio across large-cap and mid-cap stocks i.e. the leaders of today as well as the future leaders. Thus, you benefit from the stability of large-caps and high growth potential of mid-caps through a single fund.
During highly volatile market conditions Large & Midcap Funds can prove to be resilient compared to riskier categories such as Mid Cap Funds and Small Cap Funds. Moreover, the category is well-placed to take advantage of a market recovery and outperform Large Cap Funds, thus creating wealth for investors over the long term.
Canara Robeco Emerging Equities Fund is a popular scheme in the Large & Midcap fund category that has recorded superior performance across most time periods and has created ample wealth for its investors.
Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Emerging Equities Fund 5 years ago
Past performance is not an indicator of future returns
Data as on July 18, 2022
(Source: ACE MF)
Launched in March 2005, Canara Robeco Emerging Equities Fund is one of the popular schemes in the Large & Midcap Fund category and carries a successful track record of over 17 years to its credit. During bear phases, such as the one witnessed in early 2020, Canara Robeco Emerging Equities Fund has contained the downside risk better than the benchmark and many of its peers. It has also performed reasonably well during bull market phases. With this, the fund has stood out with its superior performance over the complete market cycle. Over the last five years, Canara Robeco Emerging Equities Fund has generated compounded annualised returns (CAGR) of around 13.3%, which is about a percentage point higher than the 12.3% CAGR generated by its benchmark Nifty LargeMidcap 250 – TRI index. While the fund has recorded superior growth during the past mid and small cap rallies when its portfolio was biased towards mid and small caps, it has fared well even under its current large & mid-cap mandate. Canara Robeco Emerging Equities Fund has proven its ability to generate market-beating returns in the long run and has the potential to reward its investors with active long term wealth creation.
Table: Canara Robeco Emerging Equities Fund’s performance vis-á-vis category peers
|Quant Large & Mid Cap Fund
|Axis Growth Opp Fund
|Mirae Asset Emerging Bluechip
|Canara Rob Emerg Equities Fund
|ICICI Pru Large & Mid Cap Fund
|Edelweiss Large & Mid Cap Fund
|Kotak Equity Opp Fund
|LIC MF Large & Midcap Fund
|HDFC Large and Mid Cap Fund
|SBI Large & Midcap Fund
|Nifty LargeMidcap 250 Index – TRI
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 July 18, 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 Emerging Equities Fund is a top quartile performer and has delivered substantial returns over its benchmark and the category average across various time periods in the past. The fund has recorded superior long-term performance and stands strong in the list of prime contenders in the Large & Midcap Fund category. Over the longer 3-year, 5-year, and 7-year time period, the fund has outperformed the benchmark Nifty LargeMidcap 250 – TRI by a CAGR of around 1-2 percentage points and has also stood among the top performers in the category.
Despite being an aggressively managed fund with a significant allocation to midcaps, Canara Robeco Emerging Equities Fund has registered reasonable volatility that is far lower than the benchmark and some of its prominent category peers. The fund is well capable of generating sound returns that compensates investors with superior risk-adjusted returns. Its Sharpe ratio of 0.18, a measure of risk-adjusted return, is much better than the benchmark and the category average.
Investment strategy of Canara Robeco Emerging Equities Fund
Categorized under large and midcap funds, Canara Robeco Emerging Equities Fund is mandated to hold at least 35% of its assets in large caps, with a simultaneous allocation of at least 35% in mid cap stocks. Accordingly, the fund follows a multi-cap portfolio strategy and prefers an allocation of 50:50 in large caps and midcaps. It holds a well-diversified portfolio of 50 to 60 stocks.
Canara Robeco Emerging Equities Fund is a growth-oriented fund, where the fund manager looks for high growth companies (across sectors) with ability to generate capital and backed by good management. The fund manager gives high emphasis to BMV (Business, Management and Valuation). Accordingly, while evaluating companies, the fund manager emphasises on its qualitative features, management, and governance. He also looks at quantitative parameters by analysing the balance sheet and use valuation to play with the weight i.e., underweight / overweight position in stocks. The core focus of the fund is on cash flow generating businesses. For the purpose of investment, the fund prefers companies with low P/E ratio (as compared to the industry P/E), consistent growth potential, operating in niche businesses with high and increasing profit margin, huge untapped market potential, research driven companies, scope for value added services, scope for increasing P/E to Growth and so on.
The fund manager follows a mix of the top-down and bottom-up approach to investing, and looks at macros to identify favourable sectors, and pick best companies from the sector. He picks high growth stocks from the eligible universe of companies in the large and mid-cap space and makes well use of diversification to manage downside risk. The fund has a reasonable turnover ratio of around 30% to 50%.
Graph 2: Top portfolio holdings in Canara Robeco Emerging Equities Fund
Holding in (%) as of June 30, 2022
(Source: ACE MF)
As of June 30, 2022, Canara Robeco Emerging Equities Fund held a well-diversified portfolio of 57 stocks diversified across market caps and sectors. The fund held its top exposure in large-cap names like ICICI Bank, HDFC Bank, Reliance Industries, Infosys, and SBI. The top 10 holdings in the fund’s portfolio together account for about 38% of the total assets. Focusing on long term investment strategy the target holding period of most stocks in the portfolio is around 2-3 years. The fund manager avoids taking an exposure of more than 2%-2.5% in single mid-cap stock due to liquidity concerns associated with stocks in the broader market.
In the last one year, Canara Robeco Emerging Equities Fund has benefitted from its exposure to Minda Industries, Sona BLW Precision Forgings, Max Healthcare Institute, Reliance Industries, ICICI Bank, among others. On the other hand, the fund lost some value in Gujarat Gas, Indraprastha Gas, Axis Bank, Max Financial Services, HDFC Bank, among others.
Canara Robeco Emerging Equities Fund’s portfolio is skewed towards Financials, with Banks carrying around 20.3% weightage in the portfolio, with another 6.5% in Finance stocks, followed by Auto & Auto Ancillaries, Engineering, Infotech, Pharma, Petroleum, Chemicals, and Consumption having an allocation of around 4%-10% each. Telecom, Retail, Consumer Durables, and Healthcare services stand among the other prominent sectors in the fund’s portfolio. About 74% of its portfolio is spread across top 10 sectors.
Canara Robeco Emerging Equities Fund is a category outperformer and has delivered promising risk-adjusted returns for its investors over longer time periods. It is backed by strong management systems and processes which helps it contain the downside risk better than the benchmark and many of its peers during the market crash as seen in 2020, while it does well to participate the ensuing bull phases.
Canara Robeco Emerging Equities Fund maintains a well-diversified portfolio of stocks spread across sectors and balanced across large-cap and mid-cap segment. The mix of top-down and bottom-up approach helps the fund manager shift to favourable looking sectors while picking quality high growth stocks from the sector, thus helping it generate higher alpha for investors.
Canara Robeco Emerging Equities Fund is suitable for investors looking for a well-managed scheme in the Large & Midcap Fund category with an investment horizon of at least 5-7 years.
This article first appeared on PersonalFN here