The Hindu Business Line : Canara Robeco Equity Diversified Fund: Invest

Investors can buy the units of Canara Robeco Equity Diversified Fund (Canara Equity) considering its consistent track record in delivering returns and ability to contain downsides.

The fund has managed to outperform its benchmark — BSE 200 — over one-, three- and five-year periods. Its track record has particularly improved over the last three years, in which period it generated a compounded annual return of 14.2 per cent, placing itself among the top quartile of diversified funds.

Canara Equity is predominantly a large-cap oriented fund, though there is substantial exposure (greater than 20 per cent) to mid and small-cap stocks. The fund may be suitable for investors seeking to gain from a multi-cap approach, similar to that of ‘opportunities funds’ , but with steady returns.

Canara Equity has managed to outpace funds such as Kotak Opportunities and Tata Equity Opportunities over a three-year time frame.

Performance and strategy

Canara Equity delivers returns better than the benchmark during market upswings. In the market rally of 2007 and in the recent run-up from March 2009, the fund outperformed the BSE 200 and several peers.

This may have been made possible by a significant 20-35 per cent exposure to mid-cap stocks, which led the market rally of 2007 and even a good part of the present upswing.

During periods of market downturn too, Canara has managed to contain declines better than its benchmark.

Evidence to this fact is that during January-May 2004, February-March 2007 and in the prolonged market correction in 2008-09, the fund contained losses better than its benchmark. The only time it failed on this count was in the correction of 2006.

This may have been made possible by the fact that the fund invests, at any point in time, only 90 per cent of its portfolio in equity. That figure shrinks to 80 per cent levels during heavy volatility. Collateralised borrowing and lending obligations are the chief non-equity exposures that Canara Equity has.

Among the sectors the fund has invested in, banks have always held the top slot.

Over the last one year, the fund has exited sectors such as auto and construction. It has increased exposures to defensive sectors such as software and pharma, as well telecom (which was a defensive bet until recent times).

The fund does not take concentrated exposures to stocks, with most individual scrips accounting for less than per cent of its portfolio.

The number of stocks has been in the 35-45 range over the years.

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