Canara Robeco MIP: INVEST

Investors can buy units of Canara Robeco Monthly Income Plan (Canara MIP), given its long-term track record of delivering steady returns. The fund’s portfolio is more in the nature of a conservative debt-oriented balanced scheme. The level of equity in the portfolio, which varies periodically depending on market conditions, generally helps enhance the overall returns of the fund.

Over one-, three- and five-year time periods, the fund has managed to equal or outpace its benchmark, the Crisil MIP Blended Index. The level of outperformance has been up to 2 percentage points.

In the last five years, the fund has managed to deliver compounded annual returns of 8.6 per cent, which places it in the top quartile of funds in the category. These returns put the scheme ahead of peers such as UTI MIP, Birla Sunlife MIP and L&T MIP, but behind top funds in the category such as Reliance MIP and HDFC MIP-LTP.

Investors should note that monthly income plans do not necessarily pay out a dividend every month, as it depends on the surplus available and the prevailing circumstances in the market.

But Canara MIP has managed to consistently pay a monthly dividend over the past few years, which enhances the safety factor for investors and ensures steady cash flows. The fund is a suitable avenue for investors with a moderate risk appetite, looking for steady returns over the long-term. Investors can take the SIP (systematic investment plan) route for investing in the fund.

Portfolio and strategy

Canara MIP varies the proportion of equity in its portfolio 15-25 per cent, depending on market volatility, its allocations in 2011 and 2012 being typical cases in point. Large-caps dominate the portfolio, with some mid-caps thrown in. Individual stocks, though, barring two or three, account for less than a per cent of the portfolio.

In its debt portfolio, the fund typically takes a more short-term approach. The average maturity profile of the Canara MIP’s debt investments in recent times has been less than a year.

This goes up to a little over a year at times. The yield to maturity at 8.9 per cent as of December 2012 is reasonably attractive.

The key debt instruments where the fund invests are in non-convertible debentures, money market instruments and corporate debt. These investments are mostly in safe instruments that are rated high on safety and liquidity at P1+, AAA and AA+.

The list of companies in whose money market instruments Canara MIP invests includes State Bank of Hyderabad, ICICI Bank and Oriental Bank of Commerce, among others. Large debt investments include instruments of HDFC, IDFC, Tata Sons and Reliance Capital.

With the debt portion offering a safe avenue and the equity portion being relatively less risky, Canara MIP can be a scheme for steady, rather than superlative returns over the long-term.

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