Canara Robeco Emerging Equities Fund: Outpacing Peers by Managing Risks

Large & Mid Cap Mutual Funds are mandated to invest a minimum of 35% of their assets each in equity and equity-related instruments of large-cap and mid-cap companies. When you invest in Large & Midcap Funds you get the opportunity to benefit from the stability of large-caps and the high growth potential of mid-caps through a single fund.

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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 long-term investors.

Past performance is not an indicator of future returns
Data as on January 24, 2022
(Source: ACE MF)

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 many of its peers, while its performance has been reasonable compared to the benchmark.

Despite being an aggressively managed fund with a significant allocation to mid-caps, 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 as denoted by its Sharpe ratio, which is among the best in the category.

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Investment strategy of Canara Robeco Emerging Equities Fund

Categorised under Large & 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. 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 the 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 determine 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 managers follow 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. They pick 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 focuses on a long-term investment strategy and accordingly, it has a reasonable turnover ratio of around 30% to 40%.

As of December 31, 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 HDFC Bank, ICICI Bank, Infosys, SBI, and Axis Bank. The top 10 holdings in the fund's portfolio together account for about 40% of the total assets. 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 2 years, Canara Robeco Emerging Equities Fund has benefitted immensely from its exposure to stocks like ICICI Bank, UNO Minda, Polycab India, Axis Bank, Cholamandalam Investment & Finance Co., Bharti Airtel, Reliance Industries, Aditya Birla Fashion and Retail, and Infosys, among others. On the other hand, Whirlpool of India, Gland Pharma, Ipca Laboratories, and Kansai Nerolac Paints were among the stocks that eroded some of its gains.

Canara Robeco Emerging Equities Fund's portfolio is skewed towards Financials, with Banks carrying around 24.5% weightage in the portfolio, with another 6.5% in Finance stocks, followed by Engineering, Auto & Auto Ancillaries, Infotech, Consumption, Pharma, Chemicals, Cement, Retail, and Petroleum having an allocation of around 3%-11% each.

Suitability

Canara Robeco Emerging Equities Fund has not only outperformed the benchmark and its peers across bull market rallies, but has fared well in the bear market phases too. With this the fund has managed to consistently generate superior returns across most market cycles it has witnessed so far.

Backed by strong management systems and processes, the fund has delivered promising returns for its investors over longer time periods. Canara Robeco Emerging Equities Fund maintains a well-diversified portfolio of stocks spread across sectors and balanced across the large-cap and mid-cap segments. 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.

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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.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

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Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

9. Natural Streets for Performing Arts Foundation;

10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Suresh Lulla;

13. I V Subramaniam.

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company; except for one of the Research Analysts holdings units of Canara Robeco Emerging Equities Fund;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

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Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013