If these positive indicators sustain, small and mid caps could once again join their large cap peers on its upward trajectory. Moreover, the lack of demand in mid and small caps has made their valuations attractive compared to their large cap counterparts. This expected improvement in market breadth makes it an opportune time to multiply wealth by investing in worthy Multicap Funds that offer the benefit of all the three market caps in one.

Canara Robeco Equity Diversified Fund (CREDF) is one such multicap fund that invests in equity and equity related instruments across large cap, mid cap, small cap stocks with an aim to gain from the India Growth Story.

The fund was launched in September 2003 and currently manages assets worth Rs 1,728 crore. CREDF is managed by Mr Shridatta Bhandwaldar - Head of Equities at Canara Robeco Asset Management (since July 2016) and Mr Miyush Gandhi (since October 2019).

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

Graph 2: Canara Robeco Equity Diversified Fund's year-on-year performance

 

Table: Canara Robeco Equity Diversified Fund's performance vis-à-vis category peers

Scheme Name	Corpus (Cr.)	1 Year (%)	2 Year (%)	3 Year (%)	5 Year (%)	Std Dev	Sharpe
JM Multicap Fund	144	9.14	5.78	14.54	13.62	12.36	0.14
Kotak Standard Multicap Fund	30,546	9.63	7.95	14.50	15.07	11.92	0.15
Canara Rob Equity Diver Fund	1,728	9.29	9.30	14.49	10.98	11.55	0.20
Edelweiss Multi-Cap Fund	550	5.54	7.68	14.36	10.61	12.67	0.16
Parag Parikh Long Term Equity Fund	2,784	8.38	9.93	13.67	13.32	8.61	0.24
DSP Equity Fund	3,502	10.33	7.05	13.31	12.14	13.82	0.15
HDFC Equity Fund	23,357	7.88	6.24	13.23	10.64	15.01	0.07
SBI Magnum Multicap Fund	8,760	7.66	6.61	12.79	14.85	11.96	0.12
Principal Multi Cap Growth Fund	723	0.66	3.05	12.70	12.07	14.06	0.09
Motilal Oswal Multicap 35 Fund	13,062	2.89	3.15	12.69	15.89	13.54	0.07
Aditya Birla SL Equity Fund	12,098	4.78	4.63	12.31	13.61	12.41	0.09
UTI Equity Fund	10,650	6.05	9.07	12.02	11.12	12.38	0.17
BNP Paribas Multi Cap Fund	695	6.69	3.66	11.69	12.65	13.06	0.12
Quant Active Fund	10	3.21	6.53	11.59	12.76	13.64	0.10
ICICI Pru Multicap Fund	5,197	5.35	6.33	11.54	12.48	12.40	0.07
Nippon India Multi Cap Fund	10,416	5.25	5.67	11.39	10.00	15.60	0.08
PGIM India Diversified Equity Fund	136	6.02	4.52	11.29	NA	12.99	0.11
Invesco India Multicap Fund	900	-0.62	1.86	10.25	13.00	14.91	0.09
L&T Equity Fund	2,623	1.49	3.51	9.95	10.14	11.58	0.05
Union Multi Cap Fund	325	6.29	5.51	9.84	7.22	10.98	0.10
S&P BSE 500 - TRI		4.93	6.03	12.27	10.48	12.47	0.11

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 February 19, 2020
(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.

CREDF outpaced the benchmark and category average with a noticeable across rolling period, except for 5-year rolling period where it trailed the category average. The fund's outperformance in 1-3 year rolling period has been in the range of 2-4 percentage points

CREDF stood among the top performers on a 1-year, 2-year and 3-year rolling period. The other top performers during the 3-year rolling period were JM Multicap Fund, Kotak Standard Multicap Fund, Edelweiss Multi-Cap Fund, and Parag Parikh Long Term Equity Fund.

In terms of risk-return parameters, CREDF registered lower volatility than the category average and benchmark. Nonetheless, its risk-adjusted returns have been far superior to the benchmark and many category peers.

Investment strategy of Canara Robeco Equity Diversified Fund

Classified as multicap fund, CREDF has the flexibility to invest across market capitalisation. CREDF is a market cap agnostic fund focused on large caps with few high conviction mid-cap and small cap ideas. The fund aims to provide an investment opportunity in the "Best in class" Indian companies with sustainable business models based on "Top Down" as well as "Bottom Up" approach to stock picking with focus on high growth oriented stocks available at reasonable valuation.

While selecting the 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.

Graph 3: Portfolio allocation and market capitalisation trend in Canara Robeco Equity Diversified Fund

Graph 4: Top portfolio holdings in Canara Robeco Equity Diversified Fund

Holding (in %) as on January 31, 2020
(Source: ACE MF)

CREDF held a sizeable portfolio of 56 stocks as on January 31, 2020 diversified across various sectors. The top 10 stocks constituted around 45% of its portfolio with HDFC Bank having the highest stocks allocation of 8.7%. ICICI Bank, Infosys, Reliance Industries and Kotak Mahindra Bank were the other prominent stocks in the top 10 holding with allocation in the range of 4-7% each. Rest of the stocks in the top 10 holding had allocation in the range of 2-4%.

Sector wise, the fund has the highest exposure to Banking and Finance stocks with a combine exposure of 37%. Consumption, Infotech and Pharma follow with an exposure of 9.6%, 9.1% and 7%, respectively. Some other prominent sectors in the portfolio are Engineering, Petroleum, Consumer Durables, Cement, among others.

Top contributors

Among the stocks in the portfolio, ICICI Bank contributed the most to CREDF's portfolio gains in the last one year with a weighted return of around 3.2%. The fund also benefitted from its holdings in Kotak Mahindra Bank, HDFC Bank, Reliance Industries, Whirlpool of India, Asian Paints, etc.

Meanwhile, the fund booked profits in various stocks like SBI, Bata India, Schaeffler India, GAIL (India), L&T Technology Services, Indraprastha Gas and Kansai Nerolac Paints.

Suitability of Canara Robeco Equity Diversified Fund

CREDF has shown a turnaround in performance in the last couple of years, rewarding its investors with superior risk-adjusted returns. The fund has invested in a well-diversified portfolio of stocks across market capitalisation. While large caps can render stability and liquidity to the portfolio, select mid and small cap companies can yield higher returns in the long term. However, the presence of mid and small caps increases the portfolio risk. Furthermore, CREDF's high exposure to financial services could prove risky if any of these sectors come under pressure. This makes it suitable for investors with high risk appetite and investment horizon of at least 5 years.

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!

 

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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.

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