Canara Robeco Equity Hybrid Fund: Aiming to Generate Better Returns with Lower Volatility

Canara Robeco Equity Hybrid Fund is an Aggressive Hybrid Fund that has registered commendable performance in various market phases and has rewarded its long-term investors with superior risk-adjusted returns.

Past performance is not an indicator of future returns
Data as on May 17, 2022
(Source: ACE MF)

Canara Robeco Equity Hybrid Fund has registered a noteworthy performance in the last few years and has generated a decent lead over the benchmark CRISIL Hybrid 35+65 - Aggressive Index and the category average over longer time frames. While Canara Robeco Equity Hybrid Fund has trailed the category average in the last 1-year and 2-year period, its performance was nearly in line with the benchmark. On the longer 3-year, 5-year, and 7-year periods, the fund maintained a noticeable lead over its benchmark and also outpaced 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. Its Sharpe (0.20) ranks among the best in the Aggressive Hybrid Fund category.

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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. The fund invests a major portion of its assets in equities and the balance in 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 finding companies that show consistent earnings growth but are available at reasonable valuations. The equity portion of the fund is predominantly invested in large-caps and some portion in quality mid-cap stocks with an aim to enhance overall returns through capital appreciation.

On the other hand, the debt allocation endeavours to limit the downside risk and is actively managed following a blend of the 'Accrual' and 'Duration' strategies. Canara Robeco Equity Hybrid Fund invests in high-quality corporate bonds and money market instruments in order to minimise the credit risk. However, its exposure to instruments issued by private issuers may be subject to credit risk.

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 April 30, 2022, the fund held 51 stocks in the portfolio. The top 10 equity holdings in the portfolio accounted for nearly 33.9% of the total assets. Large-cap names like ICICI Bank, Reliance Industries, Infosys, HDFC Bank, SBI, etc., appear in the list of its top portfolio holdings. Many of these stocks have been part of the fund's top holding for over two years.

In the last one year, Canara Robeco Equity Hybrid Fund has benefited the most from its exposure to ICICI Bank, Reliance Industries, Infosys, SBI, Polycab India, Bajaj Finance, Minda Industries, L&T, and Titan Company, among others.

Canara Robeco Equity Hybrid Fund has a higher allocation to stocks in the Banking and Finance sector that collectively form 22.2% of its assets. It also holds substantial exposure in Infotech, Engineering, Petroleum, Consumption, and Pharma along with diversification to Cement, Chemicals, and Auto, among others. The top 10 sectors together occupied about 58.5% of the fund's portfolio. The fund holds a well-balanced exposure to cyclical and defensive sectors.

Canara Robeco Equity Hybrid Fund's debt allocation of around 19.2% is invested across 45 debt instruments. It currently has allocation of 10.2% to G-Secs along with around 6.5% in high-rated Corporate Debt instruments and 2.5% in CDs. The fund holds high-quality assets in the debt portion of its portfolio focusing on top-rated public and private issuers. The average maturity of the debt portfolio is typically in the range of around 1-2 years.

Suitability

Canara Robeco Equity Hybrid Fund has a superior track record of creating wealth over longer time periods. The long-term investment focus and prudent risk management strategies adopted by the fund have helped it deliver superior risk-adjusted returns.

The fund has a history of over 29 years to its credit and has been dominating the returns table of Aggressive Hybrid funds for quite some time. 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 looking for a cautiously managed Aggressive Hybrid Fund with an investment horizon of at least 3-5 years.

Warm Regards,
Divya Grover
Research Analyst

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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.

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

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