Welcome PersonalFN’s weekly analysis on diversified equity mutual funds! In this issue, we have analysed Canara Robeco Flexi Cap Fund, highlighting its performance, peer comparison, investment strategy, fundamentals, portfolio, and suitability.

Canara Robeco Flexi Cap Fund is a growth-oriented Flexi Cap Mutual Fund that has done reasonably well during the bull as well as the bear market phases and has rewarded investors with handsome gains over the long run.

What is the growth of Rs 10,000 invested in Canara Robeco Flexi Cap Fund five years ago?

Past performance is not an indicator of future returns
Data as of August 16, 2023
(Source: ACE MF) 

Launched in September 2003, Canara Robeco Flexi Cap Fund is a Flexi Cap Fund that holds a mandate to invest in a dynamic mix of large-cap, mid-cap, and small-cap stocks. The fund holds a well-diversified portfolio spread across market capitalisation, but with a predominant bias towards large caps. Canara Robeco Flexi Cap Fund endeavours to identify high growth-oriented stocks across diverse industries. It has generated returns at a CAGR of around 17% since its inception. After witnessing a pro-longed underperformance from CY 2015 to 2017, the fund came out strongly during the 2018 mid-cap crash as well as the market crash of 2020 and turned out to be one of the top performers in its category. The fund’s large-cap orientation and focus towards index heavyweights helped it sustain the market crash and ride the ensuing market rally too. Over the last few years, Canara Robeco Flexi Cap Fund has managed to deliver consistently on the returns front, generating superior risk-adjusted returns for its investors. With a CAGR of around 14.6% in the last 5 years, Canara Robeco Flexi Cap Fund has managed to outperform the benchmark S&P BSE 500 – TRI by around one percentage point. An investment of Rs 10,000 in Canara Robeco Flexi Cap Fund made 5 years back would now be worth Rs 19,729, as against a valuation of Rs 18,562 for the simultaneous investment in the broader market index. The superior stock-picking ability has driven the performance of the fund, thus helping it find a spot among top category performers.

How has Canara Robeco Flexi Cap Fund performed in the past?

Scheme Name	Corpus (Cr.)	1 Year	2 Year	3 Year	5 Year	7 Year	Std Dev	Sharpe
Quant Flexi Cap Fund	1,782	20.28	14.30	36.14	22.64	20.88	19.16	0.44
HDFC Flexi Cap Fund	38,266	20.45	20.44	31.73	16.05	15.98	17.00	0.43
Parag Parikh Flexi Cap Fund	39,848	16.20	11.84	24.52	18.51	18.67	13.03	0.41
PGIM India Flexi Cap Fund	5,973	9.96	6.28	24.47	17.47	16.45	15.49	0.36
DSP Flexi Cap Fund	8,827	14.28	7.86	23.52	14.44	14.76	16.15	0.32
SBI Flexicap Fund	17,933	10.78	8.67	22.96	12.63	13.50	14.52	0.35
Aditya Birla SL Flexi Cap Fund	17,406	12.60	7.72	22.32	12.46	13.51	15.25	0.32
Canara Rob Flexi Cap Fund	10,218	10.24	8.42	21.72	14.55	15.56	14.10	0.34
Kotak Flexicap Fund	40,184	12.62	10.22	21.30	12.61	14.00	14.49	0.31
UTI Flexi Cap Fund	25,822	4.03	2.13	19.66	11.99	13.23	16.77	0.26
S&P BSE 500 – TRI		11.27	10.76	23.80	13.16	14.12	15.15	0.35

The securities quoted are for illustration only and are not recommendatory.
Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as of August 16, 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 before investing. 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 significant lead over the benchmark and the category peers over longer time periods. Notably, the fund has trailed the benchmark and some of its prominent peers in the current bull phase, which has affected its returns in the short term. However, over the long-term period of 5 years and 7 years, Canara Robeco Flexi Cap Fund currently stands among the top quartile performers in the category.

Canara Robeco Flexi Cap Fund has fared well on risk-returns parameters and has delivered decent risk-adjusted returns for its investors. With a Standard Deviation of 14.1%, Canara Robeco Flexi Cap Fund has encountered much lower volatility when compared to many of its category peers and the benchmark. Its Sharpe ratio is competitive to the category average, though slightly lower than the benchmark.

[Read: Best Flexi Cap Mutual Funds to Invest in 2023 – Top Performing Flexi Cap Mutual Funds in India]

What is the investment strategy of Canara Robeco Flexi Cap Fund?

Canara Robeco Flexi Cap Fund is classified under the Flexi Cap fund category and is mandated to hold a minimum of 65% of the assets in equity and equity-related instruments with the flexibility to dynamically allocate assets across market caps without any limit or restriction.

The fund adopts a mix of the ‘top-down’ and ‘bottom-up’ approach to investing. While evaluating companies, the fund manager, Mr Shridatta Bhandwaldar, gives importance to qualitative features, management, and governance. He also looks at quantitative parameters by analysing the balance sheet and uses valuation metrics 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 at least 70% of its asset is invested in large caps, 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.

What are the top portfolio holdings in Canara Robeco Flexi Cap Fund?

Holding in (%) as of July 31, 2023
(Source: ACE MF) 

As of July 31, 2023, Canara Robeco Flexi Cap Fund held 61 stocks in the portfolio. The top 10 stock holdings in the portfolio accounted for nearly 43.1% of the total assets. Popular large-cap names like HDFC Bank, ICICI Bank, Reliance Industries, Infosys, and L&T appear in the list of its top portfolio holdings. Most of these stocks have been a part of the fund’s core holding for multi years now. The fund’s portfolio turnover has ranged between 25-35% in the last one year, signifying low churning in the portfolio.

In the last two years, Canara Robeco Flexi Cap Fund has benefited immensely from its holding in ICICI Bank, Polycab India, L&T, ABB India, Max Healthcare Institute, SBI, Cholamandalam Investment & Finance Company, and Axis Bank which turned out to be major contributors to its returns. However, its exposure to certain stocks such as Infosys, Max Financial Services, Gujarat Gas, and Atul, eroded some of its gains.

While the fund’s portfolio is biased towards cyclicals, it holds substantial exposure to sensitive and defensive sectors as well. Around on third of the fund’s portfolio is concentrated in the Banking and Finance sector, followed by Engineering, Consumption, Infotech, and Auto & Auto Ancillaries that collectively account for another 34.8% of its assets. It also has substantial exposure in Petroleum, Cement, Pharma, Telecom, Chemicals, and Healthcare having an allocation in the range of around 2% to 5% of its assets.

Is Canara Robeco Flexi Cap Fund suitable for my investment goals and risk tolerance?

Canara Robeco Flexi Cap Fund holds a flexible mandate to invest across market caps without any upper or lower limit and accordingly 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 Canara Robeco Flexi Cap Fund do well to curb the downside risk during depressed conditions as seen during the market crash of 2020. Moreover, the performance on the upside has been in line with that of the benchmark. In certain market phases, the fund has more than outperformed the index and the category average. This ability enables it to rank high in terms of risk-adjusted returns.

Canara Robeco Flexi Cap Fund is suitable for investors looking to benefit from diversification across market caps over an 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