Investing in mid-cap stocks gives exposure to emerging high-growth sectors, with returns higher than what may be possible with large-cap stocks. Midcap Index fairly represents new economy and higher growth sectors like pathological labs, asset management companies and industrials. Midcaps currently present a very attractive opportunity for investors from a valuation standpoint to create a long-term portfolio.
Investments in mid-cap funds can create wealth over the long term despite volatility in the short term. Midcap funds tend to underperform for a while before assuming a full-fledged form that yields returns beyond inflation. In fact, prolonged investments in midcap funds can help you earn returns over the long term. This means that you must keep your mind prepared to stay invested for a prolonged period if you want to benefit from this category of funds.
More than 3/4th of the businesses within midcaps depend on domestic factors, making them an ideal playground to participate in the domestic growth potential of the economy, well supported by sustainable growth catalysts. The Midcap index has offered superior risk-adjusted returns over the long term and has only very rarely entered negative territory in rolling 3 and 5 years CAGR. Although these midcap stocks are known for their volatile nature, focusing on quality while selecting mid-cap stocks ensures that the portfolio experiences lower volatility.
Canara Robeco Mutual Fund has launched Canara Robeco Mid Cap Fund, it is an open-ended equity scheme predominantly investing in mid-cap stocks. The fund house has more than 15 years of strong investment track record of investing across market capitalisation.
Table 1: Details of Canara Robeco Mid Cap Fund
|Type||An open-ended equity scheme predominantly investing in mid-cap stocks.||Category||Midcap Fund|
|Investment Objective||The scheme's investment objective is to generate capital appreciation by investing predominantly in equity and equity-related instruments of mid-cap companies. However, there can be no assurance that the investment objective of the scheme will be realised.|
|Min. Investment||Rs 5,000 and in multiples of Re 1/- thereafter. Additional Purchase Rs. 1,000/- and in multiples of Re. 1/- thereafter.||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||
|Fund Manager||– Mr Ajay Khandelwal
– Mr Shridatta Bhandwaldar
|Benchmark Index||S&P BSE 150 Mid Cap Index TRI|
|Issue Opens||November 11, 2022||Issue Closes||November 25, 2022|
(Source: Scheme Information Document)
The investment strategy for Canara Robeco Mid Cap Fund is as follows:
Canara Robeco Mid Cap Fund would aim to generate long-term capital appreciation through an actively managed portfolio with significant exposure in mid-cap market capitalisation companies across sectors.
The fund may follow a bottom-up approach towards analysing and investing in individual companies and a top-down approach towards identifying and taking exposure across sectors. The investment emphasis of the scheme would be in identifying companies with a strong competitive position in good business and which have quality management.
The fund manager would follow an active investment style supported by in-house research. Essentially, the focus would be on fundamentally strong companies with scope for growth over time. While selecting the scrips focus will be on the business fundamentals, the industry structure, the quality of management sensitivity to economic factors, the financial strength of the company, and the key earning drivers. The scheme may, from time to time, hold cash/cash equivalents for the purpose of derivative investments and for meeting liquidity requirements.
Under normal circumstances, the Asset Allocation will be as under:
Table 2: Asset Allocation for Canara Robeco Mid Cap Fund
|Instruments||Indicative Allocations (% of Net Assets)||Risk Profile|
|Equity and Equity-related Instruments of Midcap companies||65||100||High|
|Equity and Equity-related Instruments of companies other than Midcap companies||0||35||High|
|Debt and Money Market Instruments||0||35||Low to Medium|
|Units issued by REITs and InvITs||0||10||Medium to High|
(Source: Scheme Information Document)
Who will manage Canara Robeco Mid Cap Fund?
Mr Ajay Khandelwal and Mr Shridatta Bhandwaldar will be the designated fund managers of this scheme.
Mr Ajay Khandelwal holds a PGDBM (Finance & Marketing) degree and has an overall experience of 17years. Prior to joining Canara Robeco AMC, he was associated with BOI AXA Mutual Fund as Fund Manager, B&K Securities in Equity Sales and Infosys as an Implementation Consultant.
At Canara Robeco Mutual Fund Mr Khandelwal currently manages Canara Robeco Small Cap Fund.
Mr Shridatta Bhandwaldar holds B.E (Mechanical) and M.M.S (Finance) degree. He has an overall experience of 17 years. Prior to joining Canara Robeco AMC, he was working with SBI Pension Funds Pvt. Ltd. as Head – Research/Portfolio Manager, Heritage India Advisory Pvt. Ltd. as Senior Equity Analyst, Motilal Oswal Securities as Research Analyst and MF Global Securities as Research Associate.
At Canara Robeco Mutual Fund, Mr Bhandwaldar currently manages Canara Robeco Consumer Trends Fund, Canara Robeco Small Cap Fund, Canara Robeco Focused Equity Fund, Canara Robeco Flexi Cap Fund, Canara Robeco Emerging Equities, Canara Robeco Blue Chip Equity Fund, Canara Robeco Infrastructure, Canara Robeco Equity Tax Saver Fund, Canara Robeco Equity Hybrid Fund, and Canara Robeco Conservative Hybrid Fund.
Fund Outlook – Canara Robeco Mid Cap Fund
Canara Robeco Mid Cap Fund, aims to predominantly invest in mid-cap stocks from the S&P BSE 150 Midcap universe. The scheme seeks to invest in high-growth midcap companies benefiting from demographic and structural trends.
The scheme offers investors exposure to fast-growing and new-age businesses by investing in stocks of emerging midcap companies. The core of the mid-cap portfolio of the scheme will house high-growth leaders across sectors that are expected to benefit from domestic economic growth. The fund managers will focus on quantitative outcomes and follow an in-house proprietary research model for stock selection.
The scheme’s portfolio will include cyclical stocks that showcase improved cash flows, increased return on capital from the business turnaround, or industry cycle revival. Since the mid-cap segment is currently trading at a discount to its long-term average, investors can get more fund units at lower valuations. Although the scheme offers a diversified portfolio of relatively high-quality businesses within the midcap segment, do note that midcaps are highly volatile than large-cap stocks. They can be unnerving in the short run, especially in turbulent times. The scheme being actively managed, the fund manager’s ability to construct the midcap portfolio remains to be seen.
In addition, the persistent repercussions of the geopolitical tension, spiralling inflation, and the RBI’s hike in policy rates again to curb demand and control inflation may cause a significant risk to economic growth. Quality mid-cap stocks may deliver high returns but exhibit high volatility, as they are more exposed to price corrections during an economic downturn or volatile market phase. These factors, among many others, could have a bearing on the scheme’s performance.
Thus, this scheme is suitable for savvy investors who understand the mid-cap market space and are willing to adopt the high-risk and high-return investment strategy. However, mid-cap and small-cap funds may not do well in the near future; you must invest in them only if you have a long horizon of at least 5-7 years and your investment objective aligns with the fund.
This article first appeared on PersonalFN here