Aggressive Hybrid Funds are equity-oriented hybrid mutual funds that invest in a mix of equities and debt. As per SEBI norms, Aggressive Hybrid Funds are mandated to invest 65-80% of their assets in equities and 20-35% in debt instruments.
So, if you want to benefit from the growth potential of equities, but do not have the appetite for high risk, you can consider investing in Aggressive Hybrid Funds. The debt element of these funds helps to cushion the downside risk when the equity market is in turmoil.
Canara Robeco Equity Hybrid Fund is the oldest scheme in the Aggressive Hybrid Fund category that has registered commendable performance across various market phases in the past.
Past performance is not an indicator of future returns
Data as on February 21, 2023
(Source: ACE MF)
Canara Robeco Equity Hybrid Fund is one of the oldest schemes in the Aggressive Hybrid Fund category that is about to complete three decades of its existence. Launched way back in February 1993, the fund carries a consistent track record of performing well among equity-oriented hybrid mutual funds. Canara Robeco Equity Hybrid Fund’s top-quartile performance helped it gain the attention of investors while its corpus has nearly doubled in the last two years. The fund has managed to stay ahead of the benchmark and some of its prominent category peers over longer time periods. Being an Aggressive Hybrid Fund, Canara Robeco Equity Hybrid Fund’s portfolio majorly constitutes of equity and equity-related securities along with significant allocation to debt instruments. Through the blended allocation of assets, the fund seeks to generate long-term capital appreciation along with accrual income. Canara Robeco Equity Hybrid Fund has managed to deliver on the risk-adjusted returns front, and provide some stability to its investors during depressed market conditions. Over the last 5 years, Canara Robeco Equity Hybrid Fund has appreciated at a CAGR of about 12.4% as against the 10.8% CAGR generated by the benchmark CRISIL Hybrid 35+65 – Aggressive Index. An investment of Rs 10,000 in the fund 5 years back, would now be worth Rs 17,975, as against a valuation of Rs 16,716 for the simultaneous investment in the benchmark.
Table: Canara Robeco Equity Hybrid Fund’s performance vis-á-vis category peers
|ICICI Pru Equity & Debt Fund
|UTI Hybrid Equity Fund
|Kotak Equity Hybrid Fund
|HDFC Hybrid Equity Fund
|Mirae Asset Hybrid Equity Fund
|Canara Rob Equity Hybrid Fund
|Aditya Birla SL Equity Hybrid ’95 Fund
|DSP Equity & Bond Fund
|SBI Equity Hybrid Fund
|HSBC Aggressive Hybrid Fund
|CRISIL Hybrid 35+65 – Aggressive Index
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 February 21, 2023
(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 Equity Hybrid Fund has a track record of finding a place among top-quartile performers over longer time frames. The fund has managed to generate a decent lead over the benchmark CRISIL Hybrid 35+65 – Aggressive Index across various time periods in the past. While the fund has slightly trailed the category average in the last 2-year period, its performance is reasonable compared to the benchmark. On the longer 5-year and 7-year period, Canara Robeco Equity Hybrid Fund has generated compounded returns of around 12.4% and 14.9% respectively, which is superior to its benchmark and many of its prominent peers in the category.
On risk-return parameters, Canara Robeco Equity Hybrid Fund has encountered much lower volatility when compared to its peers and is reasonable when compared to the benchmark. The fund’s superior performance over the last few years has helped it evolve in terms of risk-adjusted returns. With a Sharpe ratio of 0.17, Canara Robeco Equity Hybrid Fund currently ranks among the best in the Aggressive Hybrid Fund category.
Investment strategy of Canara Robeco Equity Hybrid Fund
Canara Robeco Equity Hybrid Fund is an Aggressive Hybrid Fund that is mandated to invest in a blend of equity and debt instruments to provide optimum returns to the investors. Generally, the majority of the fund’s assets are invested in equities and a small portion is allocated to debt securities. Depending on the prevailing market scenario, the fund managers adjust the allocation of equity and debt in the scheme, while maintaining a minimum allocation of 65% in equities.
Being an Aggressive Hybrid Fund, Canara Robeco Equity Hybrid Fund aims to benefit from the growth opportunities in the equity markets as well as generate steady income from debt markets. The fund follows a GARP (Growth at a Reasonable Price) style of investing, that combines the tenets of both growth and value investing by identifying companies that show consistent earnings growth but are available at reasonable valuations. The equity portion of the fund is invested in large-caps & quality mid-cap stocks with an aim to enhance overall returns through capital appreciation.
On the other hand, the debt allocation in Canara Robeco Equity Hybrid Fund’s portfolio endeavours to limit the downside risk and is actively managed following a blend of ‘Accrual’ and ‘Duration’ strategy. The fund managers invest in high-quality corporate bonds and money market instruments in order to minimise the credit risk. However, the allocation in instruments issued by private issuers may expose investors to some amount of credit risk.
Graph 2: Top portfolio holdings in Canara Robeco Equity Hybrid Fund
Holding in (%) as of January 31, 2023
(Source: ACE MF)
Canara Robeco Equity Hybrid Fund usually holds a well-diversified portfolio of stocks spread across market caps, but with a large-cap bias. As of January 31, 2023, Canara Robeco Equity Hybrid Fund held 53 stocks in the portfolio. The top 10 equity holdings in the portfolio accounted for nearly 34.9% of the total assets. Top large-cap names like HDFC Bank, ICICI Bank, Infosys, Reliance Industries, and SBI appear in the list of its top portfolio holdings. Many of these stocks have been a part of the fund’s top holdings for over two years now.
Canara Robeco Equity Hybrid Fund has immensely benefited from its exposure to stocks like ICICI Bank, Infosys, SBI, L&T, Axis Bank, and HDFC Bank that turned out to be top contributors to its returns in the last couple of years. UNO Minda, Reliance Industries, Bharti Airtel, Bajaj Finance, Navin Flourine International, and Sun Pharma stood among the other top gainers in the portfolio.
Canara Robeco Equity Hybrid Fund has a higher allocation to stocks in the Banking and Finance sector that collectively form 25.5% of its assets. It also holds substantial exposure in Infotech, Auto & Auto Ancillaries, Engineering, Consumption, and Petroleum. The fund holds a well-balanced exposure to cyclical and defensive sectors along with some exposure to sensitive sectors.
Canara Robeco Equity Hybrid Fund’s debt allocation of around 21% is invested across 42 debt instruments. It currently has an allocation of 13.2% to G-Secs, along with around 4.8% in high-rated Corporate Debt and 2.9% in CDs and CPs. The fund holds high-quality assets in the debt portion of its portfolio with a focus on top-rated public and private issuers. It resists taking exposure to AA & below rated debt instruments. The average maturity of its debt portfolio is typically around 2-3 years, making it moderately sensitive to interest rate movement.
Canara Robeco Equity Hybrid Fund has registered commendable performance across most market phases in the past. It has distinctly outperformed the benchmark, as well as most of its category peers even during extreme conditions.
Belonging to a process-driven fund house, Canara Robeco Equity Hybrid Fund gives high importance to safety and does not resort to taking aggressive calls for extra-ordinary returns. It focuses on selective stock-picking and maintains a well-diversified portfolio of quality stocks with a long-term view. This strategy of the fund house enables it to keep the overall risk low and perform well even during uncertain market conditions. Moreover, it has experienced fund managers at the helm whose convictions have played out well in the past and may continue to do so in the future as well.
Canara Robeco Equity Hybrid Fund is suitable for investors who want to participate in the growth potential of equity markets, while at the same time wanting a cushion against the downside risk.
This article first appeared on PersonalFN here