Canara Robeco Emerging Equities Fund: Emphasising on Curbing Downside Risk
Jun 03, 2021
The second wave of COVID-19 has shown a steady decline over the past few days, though the daily cases are still higher than the peak it touched in the first wave.
Moreover, there is a looming fear of a third wave of COVID-19; sadly, however, a large portion of the population is yet to be vaccinated. This could lead to uncertainties about the economic recovery and sustainability of corporate earnings.
Under such circumstances, it is better to be cautious about your investments and have exposure across market caps so you can benefit from the diversification. Large and Mid-Cap Funds are a separate set of the multi-cap strategy that offers investors an opportunity to diversify their investment across stocks of large and mid-sized companies. By investing in large and mid-cap funds, you can gain from the stability of large-caps and high growth potential of mid-caps.
Canara Robeco Emerging Equities Fund (CREEF) is a large and mid-cap fund that has constantly figured among top quartile performers and has rewarded its investors with decent risk-adjusted returns.
Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Emerging Equities Fund 5 years ago
CREEF carries a successful track record of over 16 years to its credit, during which it has not only outperformed the benchmark and its peers across bull market rallies but also fared well in the bear market phases. Classified under large and mid-cap funds, CREEF holds a well-balanced allocation of minimum 35% each in large-cap and mid-cap stocks respectively. Additionally, it offers the benefit of diversification to its investors. It usually holds a reasonably diversified portfolio of around 50 to 60 stocks, with an emphasis on quality and high growth stocks. Over the last five years, CREEF has generated returns at around 19.4% CAGR, as against a compounded annualised return of 16.8% generated by its benchmark Nifty LargeMidcap 250 - TRI index. Though most of its outperformance in the last 5 years has been registered during the mid and small-cap rally when its portfolio was biased towards mid and small-caps, it has fared well even under its current large and mid-cap mandate.
Data as on May 31, 2021
(Source: ACE MF)
Table: Canara Robeco Emerging Equities Fund's performance vis-à-vis category peers
Returns are point to point and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on May 31, 2021
(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.
CREEF has delivered substantial returns over its benchmark and the category average across various time periods in the past and has managed to put up a decent performance over complete market cycles. Over the long term period of 5-7 years, CREEF easily ranks among the top performing schemes and makes to the list of prime contenders in the large and mid cap funds category. Even on a shorter 2-year and 3-year duration, the fund has a decent lead over the benchmark.
Despite being an aggressively managed fund with significant allocation to midcaps, CREEF has registered reasonable volatility, which is well below 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, a measure of risk-adjusted returns, is in line with the benchmark and better than the category average.
Investment strategy of Canara Robeco Emerging Equities Fund
CREEF is categorized under large and mid-cap fund and 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 mid-caps. It holds a well-diversified portfolio of 50 to 60 stocks.
CREEF is a growth-oriented fund, where the fund managers look for high growth companies across sectors with the ability to generate capital and good management. The fund gives high emphasis to BMV (Business, Management, and Valuation) and evaluates companies on its qualitative features, management, and governance. They also look at quantitative parameters by analyzing the balance sheet and use valuation to determine the weight, i.e. the underweight/overweight position in stocks. The core focus of the fund is on cash-flow generating businesses.
The fund managers follow a mix of the top-down and bottom-up approach to investing, and look at the macros environment to identify favourable sectors to pick the best companies from a particular sector. They pick high growth stocks from the eligible universe of companies in the large and mid-cap space and utilises diversification well to manage downside risk. The fund has a reasonable turnover ratio of around 60% to 70%.
Graph 2: Top portfolio holdings in Canara Robeco Emerging Equities Fund
Holding in (%) as on April 30, 2021
(Source: ACE MF)
As on April 30, 2021, CREEF held a well-diversified portfolio of 60 stocks diversified across market caps and sectors. The fund held its top exposure in large-cap names such as, HDFC Bank, ICICI Bank, Infosys, Bajaj Finance, and Axis Bank. The top 10 holdings in the fund's portfolio together account for about 36% of the total assets. Focusing on its long-term investment strategy, the target duration of most stocks in the portfolio is around 2-3 years. The fund managers avoid taking an exposure of more than 2%-2.5% in single mid-cap stock due to liquidity concerns, and hold a long tail of around 20 stocks with an exposure of less than 1% in each stock.
In the last one year, CREEF benefitted immensely from its exposure to stocks such as, ICICI Bank, Bajaj Finance, Cholamandalam Investment & Finance Co., HDFC Bank, Infosys, Gujarat Gas, Reliance Industries, NavinFlourine International, among others, which has helped it generate significant gains for investors.
CREEF's portfolio is currently skewed towards Financials, with Banks carrying around 16.6% weightage in the portfolio, with another 13.6% in Finance stocks, followed by Infotech, Engineering, and Consumption having an allocation of around 7%-8%. Pharma, Chemicals, Auto Ancillaries, Petroleum Products, Consumer Durables, Cement, Oil & Gas, and Retail stand among the other prominent sectors in the fund's portfolio. About 75.6% of its portfolio is spread across top 10 sectors.
Suitability
Backed by strong management systems and processes, CREEF has delivered promising returns for its investors over longer time periods. CREEF has managed to contain the downside risk better than the benchmark and many of its peers in the recent market crash of 2020, while it did well to participate in the current bull phase. It is well equipped to face the market volatility going ahead.
CREEF maintains a well-diversified portfolio of stocks spread across sectors and balanced across large-cap and mid-cap segments. The mix of its top-down and bottom-up approach helps the fund managers shift to favourable looking sectors while picking quality high growth stocks from the sector, thus helping it generate higher alpha for investors.
CREEF is suitable for investors with high risk appetite looking for a reasonable exposure across market caps with an investment horizon of at least 5-7 years.
Warm Regards,
Divya Grover
Research Analyst
PS: Here's a high potential opportunity that can multiply wealth you. Get access to PersonalFN's high-return generating Alpha Funds Report 2021 that could potentially boost your portfolio returns significantly over the next few years.
PersonalFN's research team has developed a 'SMART Alpha Score' model that has additional parameters to select the top equity mutual funds.
With optimum weightage to each parameter, which we consider important in identifying fundamentally strong funds with the potential to generate alpha, this model helps zero in on quality names that have the ability to outperform the benchmark and generate alpha returns for its long term investors.
Subscribe to The Alpha Funds Report -2021 today!
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.
Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds
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.
Terms and condition on which its offer research report
For the terms and condition for research report click here.
Details of associates
-
Money Simplified Services Private Limited;
-
PersonalFN Insurance Services India Private Limited;
-
Equitymaster Agora Research Private Limited;
-
Common Sense Living Private Limited;
-
Quantum Advisors Private Limited;
-
Quantum Asset Management Company Private Limited;
-
HelpYourNGO.com India Private Limited;
-
HelpYourNGO Foundation;
-
Natural Streets for Performing Arts Foundation;
-
Primary Real Estate Advisors Private Limited;
-
HYNGO India Private Limited;
-
Suresh Lulla;
-
I V Subramaniam.
Disclosure with regard to ownership and material conflicts of interest
-
‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;
-
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 holding units of Canara Robeco Emerging Equities Fund;
-
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;
-
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.
Disclosure with regard to receipt of Compensation
-
Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;
-
Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;
-
Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;
-
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.
-
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
General disclosure
-
The Research Analyst has not served as an officer, director or employee of the subject Company.
-
QIS or the Research Analyst has not been engaged in market making activity for the subject Company.
Click here to read PersonalFN's Mutual Fund Rating Methodology
Subject Company means Mutual Fund Schemes
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