Compared with many of its peers, Edelweiss Large Cap Fund is rather small, with a corpus of just about ₹133 crore (as of June 2018). But size hasn’t stopped this David from getting the better of many Goliaths.
With an annual return of about 17 per cent over the past year, the fund stands tall in the large-cap category. Many peers have been struggling with single-digit returns despite a market rally that has been led by large-caps.
Diversified portfolio
In contrast, Edelweiss Large Cap with high-teen returns has beaten its benchmark Nifty 50 TRI (Total Return Index) and figures in the top quartile in its category.
Over a five-year period, too, the fund, which has been around since 2009, is a top-quartile performer and benchmark beater.
Investors with a long-term perspective can buy the fund through the SIP route.
Edelweiss Large Cap’s investment approach is based on GARP (growth at reasonable price) — the fund invests in quality businesses delivering consistent high growth, but available at reasonable valuations.
A predominantly large-cap portfolio of over 50 stocks across multiple sectors caps volatility and keeps the risk relatively low.
Robust stock selection and willingness to take cash calls, if need be, based on valuations, help the fund participate well in upsides and contain downsides.
It did better than the benchmark and the category average during the market rallies of 2014 and 2017, and also during the market weakness of 2011 and 2015.
The fund moves quite rapidly in its asset-allocation shifts.
For instance, equity exposure changed from 79 per cent of the corpus in April 2018, to 84 per cent in May 2018, and to 76 per cent in June 2018.
These quick shifts result in a high portfolio-turnover ratio. But thankfully, that does not translate into a high expense ratio. On the contrary, the fund’s expense ratio (last reported 1.38 per cent for regular plans) is much lower than the category average (about 2.6 per cent).
This significant difference in the costs charged to investors aids returns.
Good picks
The fund’s portfolio has several market leaders such as HDFC Bank, Reliance Industries, L&T, TCS, Maruti Suzuki and HUL.
Over the past year, it has increased stake in stocks such as Reliance Industries, HUL and TCS; the sharp rally in these stocks has helped the fund’s performance. Over the long term, stocks such as Maruti Suzuki and Britannia Industries have been multi-baggers.
Over the past year, the fund has upped stake in private sector banks, finance companies and software firms.
It is currently overweight on the financials, FMCG and technology sectors vis-à-vis the benchmark, while being underweight on oil and gas, private banks, and pharmaceutical sectors.
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