Mutual Funds

Canara Robeco Emerging Equities: Good one for the long run

Yoganand D | Updated on March 10, 2018 Published on September 17, 2017

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This mid-cap fund has been a consistent performer and could spice up returns

Mid- and small-cap funds have been delivering mouth-watering returns over the past few years, with the rally showing no signs of abating.

For instance, over the past five years, mid and small-cap funds have delivered average returns of 24 per cent and 28 per cent, respectively, outshining the large-cap average return of 15 per cent as well as multi-cap funds average return of 18.3 per cent.

While large-cap and multi-cap funds remain a relatively safer bet in volatile markets, having some exposure to mid- and small-cap can spice up returns.

Canara Robeco Emerging Equities fund is a good choice within the mid- and small-cap category. The fund has delivered top gains of 30 per cent and 20.7 per cent over five and seven-year periods, respectively. These returns have outshone its benchmark, Nifty Free Float Midcap 100 index, by 10 percentage points.

Investors with a high risk appetite and long-term perspective could consider investing in the mid-cap fund at this juncture.

Over the last one and three years, the fund has delivered 30 per cent and 21.8 per cent, respectively, beating the benchmark returns by 6-10 percentage points. The fund is among the top quartile funds across time frames. Canara Robeco Emerging Equities marginally trails behind a few funds such as Aditya Birla SL Pure Value and Mirae Asset Emerging Bluechip.

Performance and strategy

Barring 2016, when it underperformed, the fund has been delivering benchmark beating returns since 2009. Strong year-to-date performance of 39 per cent gains has pushed the fund back into the top quartile. The fund invests 95-98 per cent in equities and the balance in debt and cash segment, over the last four years.

About 65 per cent of the fund’s allocation goes into mid-cap space and 25 per cent towards small-caps while large-cap stocks and debt make up the rest of the pie. The fund follows a blend of growth and value strategy. It adopts bottom-up stock picking and growth at reasonable price (GARP) investment philosophy. For instance, the fund had picked Minda Industries last September and has gradually upped its allocation in the stock to 4 per cent currently. Meanwhile, this stock has turned into a multi-bagger.

Moreover, this also shows that the fund takes a long-term view on certain mid-cap stocks forming a part of its core portfolio. Stocks such as Atul, Force Motors, Ramco Cements, Dalmia Bharat and Whirlpool of India continue to remain in the kitty over the long term. These stocks have also yielded excellent returns.

The fund controls risk by spreading its asset allocation and holds above 71 stocks with the highest individual exposure capped at 4 per cent. Currently, the fund is underweight on financials and healthcare sectors, but overweight on chemicals, FMCG and engineering sectors.

Published on September 17, 2017

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