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Fund Analysis: Axis Equity: A marathon runner
Thu, May 30, 2013
Source : Shoaib Zaman, Citrus Interactive

Axis Equity Fund is one of the flagship equity funds of Axis Mutual Fund with monthly average assets under management at Rs 531.30 crore, as on April 30, 2013. The fund was launched on January, 2010 and is benchmarked against the CNX Nifty.

Performance

The fund is a consistent performer over the time horizon of 1 year and 3 years as well. It has maintained its standing in the first quartile in the peer-set and has outperformed the CNX Nifty over the last one year.   

Scheme Name

1 Year

3 Years

Since Inception

Axis Equity Fund(G)

22.29

6.32

7.55

CNX Nifty Index

13.00

3.96

3.57

Category Average

10.24

3.13

--

Rank

2 /  149

23 /137

--

CAGR Returns

 

 

 

During calendar years 2011 and 2012, the fund was in the second quartile among its peer-set of equity diversified funds.

Scheme Name

2011

2012

MTD

YTD

Axis Equity Fund(G)

-22.55

31.73

5.03

5.38

CNX Nifty Index

-24.62

27.7

4.36

0.43

Category Average

-24.09

33.81

3.86

-4.3

Rank

52 /143

76 / 148

19 /152

1 / 152

Absolute Returns

 

 

 

 

Monthly Performance of the fund shows that it has performed very well during the falling market of February and March 2013.

Scheme Name

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

Axis Equity Fund(G)

4.5614

1.3423

1.1494

-2.5285

0.9159

4.86

CNX Nifty Index

4.1594

0.4294

1.4099

-5.0984

-0.6495

3.9583

Category Average

4.2012

1.6828

-0.5005

-6.5172

-1.9935

3.2055

Fund Rank

53/150

90/150

26/150

2/150

1/150

10/150

Absolute Returns  ; YTD - Year-to-date ; MTD - Month-to-date

Risk. In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has so far taken a higher level of risk compared to the category median.

Scheme Name

Standard Deviation

Beta

Axis Equity Fund(G)

0.97

0.88

Category Median

0.94

0.81

Average over the last three years

Risk-adjusted Returns. In terms of measures of risk-adjusted return such as Treynor ratio and Sharpe ratio (measured over last three years), the fund has higher risk-adjusted returns compared to the category median.

Scheme Name

Treynor

Sharpe

Axis Equity Fund(G)

0.017

0.02

Category Median

0.003

0.01

Average over the last three years

Processes

By its mandate the fund is a pure equity diversified fund. The fund’s investment strategy allows the flexibility to invest across the market capitalization (i.e. large, mid and small cap companies) and in all industries / sectors. The fund’s performance will completely depend upon the view of the fund manager and the research process followed by the fund management team.

The fund has an expense ratio of 2.74 per cent. This is a tad 22 basis point higher than the median expense ratio for the equity diversified category that stands at 2.52 per cent.

The fund has a high exit load compared to most of its peers. Most of the equity diversified funds have an exit load only for the first year. Its exit policy is as following

Exit load 

Type of exit

Time frame

3%

redeemed / switched out

up to 6 months from the date of allotment

2%

redeemed / switched out

after 6 months & up to 12 months from the date of allotment

1%

redeemed / switched out

after 12 months & up to 24 months from the date of allotment

Portfolio

Number of equity holdings. The fund has 32 stocks in its portfolio against the category median of 43. The fund’s equity holdings averaged 31 in 2010, 36 in 2011 and 37 in 2012. Its average portfolio allocation in the last three years has been 35 stocks, reflecting a concentrated portfolio.

In the last two years (between May 2011- April2012), the fund has had an average exposure of 80.32 per cent to large-cap companies. During this period average exposure to mid-cap companies was at 5.43 per cent and to small cap was a minuscule 1.13 per cent. Other equity, comprising of derivatives, had exposure levels of 1.35 per cent. Its average cash exposure level during the period was 12.21 per cent.

As on April 2013, exposure to large-cap was at 78.16 per cent, mid-cap level was at 6.10 per cent, small cap is 0.41 per cent and exposure to cash is at 15.33 per cent. It has no exposure to other equity. The top five sectors in the portfolio as of April 30, 2013 had an allocation of 55.07 per cent: Banks, Software, Consumer Non-Durables, Pharmaceuticals and Finance.

In the last 12 months (May 2012-April 2013) the common stocks that put together have accounted for 35-to-40 per cent of the portfolio are: ITC, HDFC Bank, Housing Development Finance Corporation, Tata Consultancy Services, ICICI Bank, Reliance Industries, Infosys, State Bank of India and Tree House Education & Accessories.

In the past 12 months the fund manager has had a higher exposure to cyclical stocks, forming around 50 per cent of the portfolio, and 15 per cent in defensive picks and 18 per cent in services. ITC is the single largest holding among the defensive stocks and this must have contributed immensely to the performance of the fund. The picks in the cyclicals are largely from the banking and financial sector and that too in the private sector. We believe that the fund manager will be agile in rotating his portfolio in the defensive sector and the higher tilt to the cyclical should benefit the fund in a declining interest rate scenario.

Fund Manager

The fund is currently being managed by Chandresh Nigam. He has recently (since May 1, 2013) taken over as Managing Director and Chief Executive officer (MD & CEO) of Axis Mutual Fund. Nigam has over 20 years of experience in the equity market. He is a Mechanical Engineer from IIT Delhi and a PGDM from IIM Calcutta. Before joining AXIS AMC, Nigam was managing TCG IndiaStar funds for The Chatterjee Group. He had also worked as Senior fund manager, Equities in Prudential ICICI AMC, and he was also fund manager at the Zurich AMC, that later became HDFC AMC.

There are 5 people in the equities team out of which 4 also have fund management roles while one is a dedicated research analyst. The entire equities team has research responsibilities including the fund managers. Each of the fund managers’ has over 10 years of cumulative experience in research and fund management.

View

The fund’s performance will mirror the skills of the fund manager. Nigam is an experienced and able fund manager and has delivered a superior performance over the benchmark and peer group over the last 1 and 3 years and since inception. There is no notification about a change in fund manager as yet. By its mandate the fund is a pure equity diversified scheme which can invest in any market capitalization and in any sector but it has mostly been a large-cap fund.

This is a good fund for investors with a view of at least 2 years or more, and who are looking for a fund with large cap tilt. Any mid course change will cost him an exit load as well as the cost of underperformance which should be the only reason to prompt a churn. There are other funds with lower exit load for investors who want to invest for a tactical position in their portfolio. 

 
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