Canara Robeco Emerging Equities Fund: Identifying Leaders of Tomorrow
Dec 26, 2019

Author: Divya Grover

Canara Robeco Emerging Equities Fund: Identifying Leaders of Tomorrow
(Image source: photo created by snowing - www.freepik.com )

The economy is expected to revive in the coming quarters and certain high quality mid cap stocks are likely to benefit as a result of the low valuations. On the other hand, even though certain large cap stocks are rallying, many stocks in the segment are beaten down. These stocks too could see the upside again as the economy recovers.

Mutual fund managers can reward investors by picking such good quality growth stocks across large and midcap segment available at reasonable valuations. Investors looking to grow their wealth from the steady returns of large caps and immense growth potential of mid caps can invest in large & midcap funds.

Canara Robeco Emerging Equities Fund (CREEF) is a large & midcap fund that seeks to identify those companies that have the potential to become leaders of tomorrow in their respective sectors within the large and midcap space.

CREEF was launched in March 2005 and currently has an asset size of Rs 5,258 crore. It is managed by Mr Miyush Gandhi (since April 2018) and Mr Shridatta Bhandwaldar (since October 2019).

Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Emerging Equities Fund 5 years ago

CREEF has showcased remarkable performance in the last five years. If you had invested Rs 10,000 five years back on December 24, 2014, it would have grown to Rs 18,773 now (as calculated on December 24, 2019). This translates into compounded annualised growth rate of 13.4%. In comparison a simultaneous investment of Rs 10,000 in its benchmark Nifty LargeMidcap 250 - TRI would now be worth Rs 16,261, at a CAGR of 10.2%. The fund has generated a consistent lead over the benchmark in the last five years with a noticeable margin.

Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Emerging Equities Fund 5 years ago
 
Data as on December 24, 2019
(Source: ACE MF)
 
Graph 2: Canara Robeco Emerging Equities Fund's year-on-year performance
 
Graph 2: Canara Robeco Emerging Equities Fund's year-on-year performance
 
*YTD as on December 24, 2019
(Source: ACE MF)

Launched in March 2005, CREEF has a performance track record of close to 15 years. The year-on-year performance comparison of CREEF vis-à-vis its benchmark Nifty LargeMidcap 250 - TRI shows that the fund outperformed the index in 7 out of last 10 calendar years. In the bull phase of 2014, the fund outpaced the benchmark by a huge margin of over 47 percentage points. The fund's performance was nearly in line with the benchmark in CY 2013, whereas it lagged the index in CY 2016 and CY 2018. While the fund struggled to manage the downside risk in CY 2018, it has shown significant improvement in the current year and has even outperformed the benchmark.

Table: Canara Robeco Emerging Equities Fund's performance vis-a-vis category peers

Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) Std Dev Sharpe
Mirae Asset Emerging Bluechip 9,229 7.17 9.22 17.49 22.02 14.46 0.20
Invesco India Growth Opp Fund 2,108 4.35 10.87 15.27 15.22 12.62 0.23
Sundaram Large and Mid Cap Fund 953 4.70 9.95 15.04 15.06 13.57 0.19
LIC MF Large & Midcap Fund- 585 2.49 7.33 14.96 NA 13.63 0.16
Canara Rob Emerg Equities Fund 5,258 0.02 6.41 14.86 19.99 15.19 0.15
Principal Emerging Bluechip Fund 2,120 -3.36 4.28 13.40 17.72 15.26 0.11
Essel Large & Midcap Fund 105 4.81 6.05 13.33 NA 14.08 0.12
Kotak Equity Opp Fund 2,837 4.85 6.47 13.27 14.83 12.78 0.15
DSP Equity Opportunities Fund 5,623 2.32 5.51 12.76 14.56 13.86 0.12
IDFC Core Equity Fund 2,831 -1.14 5.01 12.39 12.50 13.46 0.11
Edelweiss Large & Mid Cap Fund 489 2.98 8.82 12.18 12.72 12.41 0.18
Tata Large & Mid Cap Fund 1,542 6.91 7.64 11.52 13.57 12.34 0.15
SBI Large & Midcap Fund 2,808 2.60 7.00 11.31 13.76 12.99 0.13
ICICI Pru Large & Mid Cap Fund 3,567 0.97 4.00 10.66 10.46 12.50 0.06
L&T Large and Midcap Fund 1,365 -4.61 2.43 10.25 11.62 14.32 0.09
Aditya Birla SL Equity Advantage Fund 5,070 -2.74 1.44 9.82 14.00 15.35 0.08
HDFC Growth Opp Fund 1,374 1.51 4.35 9.20 7.23 13.51 0.08
Quant Large & Mid Cap Fund 4 -2.26 1.08 9.05 16.45 12.94 0.03
Franklin India Equity Advantage Fund 2,608 -1.00 3.99 8.43 11.54 12.56 0.05
UTI Core Equity Fund 867 -3.28 2.48 8.21 9.54 13.20 0.04
Nifty LargeMidcap 250 - TRI -0.42 6.10 12.45 13.19 14.12 0.12
Returns are on a rolling basis and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are
compounded annualised.
Data as on December 24, 2019
(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 outperformed the benchmark and category peers with a decent margin across rolling period, except 1-year rolling period where it trailed the category average. On a 5-year rolling period basis, the fund outpaced the benchmark and category average by over 7 percentage points.

The fund stood among the top performers on a 3-year and 5-year rolling period basis. Mirae Asset Emerging Bluechip, Invesco India Growth Opp Fund, and Sundaram Large and Mid Cap Fund were the other top performers in the category.

In terms of risk-return profile, the fund registered higher volatility than the benchmark and the category average. However, it managed to reward investors with reasonable risk-adjusted returns.

Investment strategy of Canara Robeco Emerging Equities Fund

Categorised as large & midcap fund, CREEF is mandated to invest at least 35% each in equity and equity related instruments of large and midcap companies. Accordingly, the fund invests in an actively managed diversified portfolio of large and midcap stocks following a bottom-up approach.

It focuses on companies which have huge potential to emerge as larger companies to match their global peers. The investment emphasis of the fund is to invest in growth-oriented businesses with competent management at reasonable valuations and hold them for long term. While selecting stocks the fund focuses on the fundamentals of the business, the industry structure, the quality of management, sensitivity to economic factors, the financial strength of the company and the key earnings drivers.

The fund has the flexibility to invest up to 35% of its assets in other equity and equity related instruments, debt and money market instruments.

Graph 3: Portfolio allocation and market capitalisation trend in Canara Robeco Emerging Equities Fund

Investment strategy of Canara Robeco Emerging Equities Fund
 
Holding (in %) as on November 30, 2019
(Source: ACE MF)

CREEF predominantly invests in large and midcap companies. The fund's allocation in large caps is in the range of 45-55% while it allocates 35-40% of its assets in midcaps. It also seeks opportunities in small caps where it allocates 5-8% of its assets. The fund maintains cash levels in the range of 3-6%. As on November 30, 2019, the fund held 49.2% in large caps, 41.6% in midcaps, 5.25% in small caps and 4% in cash and equivalents.



 

Graph 4: Top portfolio holdings in Canara Robeco Emerging Equities Fund

Top portfolio holdings in Canara Robeco Emerging Equities Fund Graph 4: Top portfolio holdings in Canara Robeco Emerging Equities Fund
Holding (in %) as on November 30, 2019
(Source: ACE MF)

CREEF held a diversified portfolio of 61 stocks across various sectors as on November 30, 2019. The top 10 stocks, which include 5 banking stocks, constitute 36.7% of the portfolio. HDFC Bank has the highest allocation in the portfolio at 7.1%, followed by ICICI Bank (6.5%), Reliance Industries (4.6%) and Axis Bank (4.2%). Rest of the stocks in the top 10 holding have allocation in the range of 2-3%.

In terms of sectors, the fund has the highest exposure to Banks at 22.3% with another 10.9% in Finance. This is followed by Engineering, Consumption and Infotech with allocation of 8.7%, 6.5% and 6.4%, respectively. Pharmaceuticals, Petroleum Products and Consumer Durables are the other prominent sectors in the portfolio.

Top contributors

Among the stocks in the portfolio, ICICI Bank contributed the most to the fund's gains in the last one year with a weighted return of 2.3%. HDFC Bank, Reliance Industries, Indraprastha Gas, Whirlpool of India and Kotak Mahindra Bank were the other major contributors to the portfolio gains. Most of these stocks are part of the fund's top holdings.

On the other hand stocks like Century Textiles & Industries, ITC, Mahindra & Mahindra Financial Services and Jubilant Life Sciences eroded some of its gains.

Suitability of Canara Robeco Emerging Equities Fund

CREEF has rewarded investors well over the long term with promising returns and sound risk management. It holds a well-diversified portfolio of stocks in large and midcap segment, however, its high allocation to banking & finance sector may lead to increased volatility if the sector comes under pressure due to any reason. The fund's higher allocation to large and midcaps along with lower levels of exposure to small caps can help it create long term wealth though at a higher risk. This makes CREEF suitable for aggressive investors with investment horizon of least 5 years or more.

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.

Editor's note:  The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!

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

  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. Rahul Goel;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
  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 analyst holding 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.

Disclosure with regard to receipt of Compensation
 
  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

General disclosure
  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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Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 16 Jolly Maker Chambers II, 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



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