Canara Robeco Flexi Cap Fund: Yielding Higher Returns From a Diversified Portfolio
Listen to Canara Robeco Flexi Cap Fund: Yielding Higher Returns From a Diversified Portfolio
00:00
00:00
After a stellar broad-based rally that continued for more than a year, the Indian equity market has turned volatile amid weak global cues and stretched valuations. The market is likely to witness further correction when the focus shifts from momentum to quality stocks.
Investors who do not have a very high risk profile and long term investment horizon can consider booking profits in riskier categories like Mid-cap Funds and Small-cap Funds. But since it is important to maintain a diversified portfolio of stocks spread across market caps to mitigate risk and earn optimal returns, investors can consider investing in Flexi-cap Funds.
Flexi-cap funds follow a dynamic investment approach and have the flexibility to invest across market cap segment, as per the conviction of the fund manager. This gives Flexi-cap funds the opportunity to take advantage of changing dynamics to generate higher alpha for investors without taking excess risk.
Canara Robeco Flexi Cap Fund is an actively managed Flexi-cap fund that stood strong during the recent market crash and has participated the current bull phase to reward investors with superior gains.
Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Flexi Cap Fund 5 years ago
Canara Robeco Flexi Cap Fund, the erstwhile Canara Robeco Equity Diversified Fund, is among the many Multi-cap funds that have been recategorized under the newly introduced Flexi-cap funds category. The change in mandate didn't have a significant impact on its portfolio strategy as it allowed the fund to hold a diversified portfolio across market capitalisation with predominant bias towards large caps. The fund's large-cap orientation and focus towards index heavyweights helped it sustain the midcap crash of 2018 as well as the market crash of 2020, and ride the ensuing market rally. Since then Canara Robeco Flexi Cap Fund has managed to deliver consistently on the returns front, generating superior risk-adjusted returns for its investors. An investment of Rs 10,000 in Canara Robeco Flexi Cap Fund five years back would now be worth Rs 27,151, as against a valuation of Rs 23,916 for the simultaneous investment in the broader S&P BSE 500 - TRI index. Notably, the fund trailed the index for the most part of its existence and managed to catch up only in the last few years.
Data as on November 17, 2021
(Source: ACE MF)
Table: Canara Robeco Flexi Cap Fund's performance vis-a-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 November 17, 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.
Canara Robeco Flexi Cap Fund recorded turnaround performance in the last few years which has helped it to improve its overall performance track record. Over the longer horizon of 5 years and 7 years Canara Robeco Flexi Cap Fund has generated a lead of around 1-2 percentage points over the benchmark. Even over the shorter 2-year and 3-year period, it has outperformed the benchmark by a healthy margin and stood strong against its popular category peers. Notably, Canara Robeco Flexi Cap Fund has outperformed at a time when most of its prominent peers found it difficult to even match the market returns.
Canara Robeco Flexi Cap Fund has fared better in terms of risk-adjusted returns too. With a Standard Deviation of 18.98%, Canara Robeco Flexi Cap Fund has encountered much lower volatility when compared to its peers and the benchmark while its Sharpe ratio (0.31) ranks among the highest in the flexi-cap funds category.
Investment strategy of Canara Robeco Flexi Cap Fund
Being a Flexi-cap fund, Canara Robeco Flexi Cap Fund has a mandate to hold minimum 65% of its assets in equity and equity related instruments with the flexibility to dynamically allocate assets across market caps without any limit or restriction. Canara Robeco Flexi Cap Fund is a market cap agnostic fund that focuses on large caps with few high conviction mid-cap and small-cap ideas.
The fund has positioned itself as an 'All Season Fund' that invests across industries and market capitalization to reduce the impact of volatility. It aims to provide an investment opportunity in the 'Best in Class' Indian companies that have sustainable business. It utilises the top-down as well as bottom-up approach to stock picking with focus on high growth-oriented stocks available at reasonable valuation.
While evaluating companies, the fund management team gives importance to qualitative features, management and governance. They also look at quantitative parameters such as cash flows and balance sheet to determine the weight i.e. underweight / overweight position. Focusing on long term growth, the fund follows buy-and-hold investment strategy until the full potential of its holdings are derived.
Graph 2: Top portfolio holdings in Canara Robeco Flexi Cap Fund
Holding in (%) as on October 31, 2021
(Source: ACE MF)
Canara Robeco Flexi Cap Fund usually holds a well-diversified portfolio of stocks spread across market caps, but with a large-cap bias. As on October 31, 2021, Canara Robeco Flexi Cap Fund held as many as 59 stocks in its portfolio. The top 10 stock holdings in the portfolio accounted for around 43.4% of the total assets. Large cap names like ICICI Bank, HDFC Bank, Infosys, Reliance Industries, and Bajaj Finance appear in the list of its top portfolio holdings. Most of these stocks have been part of the fund's core holding for over 2 years now.
In the last one year stocks of ICICI Bank, Infosys, Bajaj Finance, and HDFC Bank, among others have turned out to be major contributors to its returns. It also booked profits in stocks of Whirpool of India, Shree Cement, Dr Lal Pathlabs, etc. The fund's portfolio turnover has ranged between 45-70% in the last one year, signifying occasional churning of a portion of its portfolio.
Around one-third of the fund's portfolio is concentrated to Banking and Finance sector, followed by Infotech, Engineering, Consumption, Pharma, and Auto. It also has substantial exposure in Petroleum, Auto Ancillaries, Cement, Chemicals, Consumer Durables, Retail, etc. having an allocation in the range of around 2% to 4% of its assets. While the fund's portfolio is biased towards cyclicals, it holds substantial exposure to sensitive and defensive sectors as well.
Suitability
Canara Robeco Flexi Cap Fund has registered superior outperformance over the benchmark and the category peers over the last few years, and has found place among the top performers in the Flexi-cap funds category. The fund has proven its ability to deliver strong returns across longer time periods and has scored exceptionally well in terms of risk-adjusted returns.
Despite being an aggressive growth-oriented fund, Canara Robeco Flexi Cap Fund avoids taking large momentum bets and focuses on picking quality stocks. Although the fund has a penchant to churn a portion of its portfolio, it has shown a lot of patience with many of its stocks and sectoral calls which have paid off its investors in the due course.
Given the fund's high exposure to large-caps along with significant exposure to mid-cap and small-cap stocks Canara Robeco Flexi Cap Fund is suitable for investors having high risk appetite and a long term investment horizon of at least 5 years.
Warm Regards,
Divya Grover
Research Analyst
PS: If you are looking for quality mutual fund schemes (including Equity-linked Saving Schemes) to add to your investment portfolio, I suggest you subscribe to PersonalFN's premium research service, FundSelect. PersonalFN's FundSelect service provides insightful and practical guidance on which mutual fund schemes to Buy, Hold, and Sell.
Currently, with the subscription to FundSelect, you could also get Free Bonus access to PersonalFN's Debt Fund recommendation service DebtSelect.
If you are serious about investing in a rewarding mutual fund scheme, subscribe now!
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;
-
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