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Fund Analysis: Canara Robeco Emerging Equities Fund : Aggressive investment
Tue, Jul 07, 2015
Source : Khyati Shah, Citrus Interactive

Canara Robeco Emerging Equities Fund is an open ended diversified equity fund. The scheme seeks to generate long term capital appreciation by primarily investing in diversified mid cap stocks that have a potential to emerge as the bigger corporates with higher performance. For the purpose of this fund, mid and small companies are defined as those which are ranked from 151 to 500 on the basis of market capitalisation. The fund was launched in March 2005 and is benchmarked against the CNX Midcap index. The fund has an AUM of Rs. 502 crore as on May 31, 2015.

 

Performance:

Canara Robeco Emerging Equities Fund has consistently beaten the CNX Midcap Index and the equity diversified category average across all time frames in the last 5 years. The fund has consistently been in the top quartile in terms of performance against other funds in the equity diversified space. Since its inception the fund has outperformed the CNX Midcap index signifying outperformance since its initial years.

Scheme Name

YTD

1-Year

3-Years

5-Years

Since Inception

Canara Robeco Emerging Equities Fund

5.93

35.53

36.4

22.54

18.78

CNX Midcap

3.38

17.24

20.93

9.85

14.91

Category Average

3.52

21.33

24.61

13.67

NA

Rank

40/158

13/155

9/146

3/135

NA

Figures are in % as on June 30, 2015;

 

The fund has consistently outperformed the equity diversified category average on an annual basis over the last five years except 2013. This is quite commendable given its focus on mid caps which have been quite volatile over the same period. The fund has consistently outperformed the CNX Midcap index over the last five years. Except for the year 2013 the fund has consistently been the top quartile in terms of performance as against other funds in the equity diversified space.

Scheme Name

2010

2011

2012

2013

2014

Canara Robeco Emerging Equities Fund

28.32

-22.28

48.89

3.16

96.02

CNX Midcap

19.16

-31

39.16

-5.1

55.91

Category Average

19.54

-24.07

34.15

5.26

54.2

Rank

12/132

47/139

9/143

108/147

6/150

Figures are in % as on June 30, 2015


Portfolio Characteristics:

Sector Concentration:  The fund concentration in the Top 3, Top 5 and Top 10 sectors is lower than the category median.

Scheme Name

Top 3

Top 5

Top 10

Canara Robeco Emerging Equities Fund

23.13

33.3

52.67

Category Median

35.28

46.86

68.84


Company Concentration:  The company concentration of the fund in the Top 3, Top 5 and Top 10 companies is lower than the category median highlighting lesser risk of the fund.

Scheme Name

Top 3

Top 5

Top 10

Canara Robeco Emerging Equities Fund

9.99

15.07

26.41

Category Median

17.36

26.27

43.07



Number of equity holdings:  As of May 31, 2015, the fund holds 67 stocks which are higher than the category median of 49 stocks in the diversified equity segment. 

The top 5 sectors in the portfolio had an allocation of 33.30% which is lower than the category average of 48.23%. The fund’s exposure to cyclical stocks currently is 67 per cent followed by services with 15 per cent exposure & defensives with 15 per cent exposure. The fund has a cash and cash equivalent of 3 per cent.  The Top five holding are Yes Bank Ltd., IndusInd Bank Ltd., Britannia Industries Ltd., Aditya Birla Nuvo Ltd. and The Federal Bank Ltd.


Risk Measures: 

The risk measure for the fund in terms of Standard Deviation (average of the last three years) is higher than the category median & in terms of Beta (average of the last three years) is lower than the category median.

Scheme Name

Standard Deviation

Beta

Canara Robeco Emerging Equities Fund

0.93

0.73

Category Median

0.9

0.86

 

Risk adjusted Returns:  The risk adjusted return for the fund in terms of Sharpe and Treynor ratios (measured as average of last three years), is superior to the category median.

Scheme Name

Sharpe

Treynor

Canara Robeco Emerging Equities Fund

0.12

0.17

Category Median

0.09

0.1

               

Processes:

Canara Robeco Emerging Equities follows bottom up approach to predominantly invest in mid and small cap companies. The fund’s investment strategy states that it should invest a minimum of 65 per cent mid and small cap equity. Mid and Small Cap companies are defined as those which are ranked from 151 to 500 on the basis of market capitalisation. The ranking of the stocks is reviewed periodically. For the other 35 per cent the fund can invest in equities of large-cap companies or in domestic debt or money market instruments.

The fund’s expense ratio of 2.20% is lower than the category average of 2.42%. The fund has an exit load of 1 per cent on or before 18 months from the date of investment and NIL after 18 months. Minimum investment in the fund is Rs 5,000.

 

Fund Manager:

The fund is currently jointly managed by Ravi Gopalkrishnan and Krishna Sanghavi. Both fund managers have taken charge of the fund since September 2012

Mr. Gopalakrishnan is an MBA from Bradley University, USA and Masters in Finance (Investments) from Drexel University, USA. He has a total experience of over 20 years of experience, in research and asset management. Prior to joining Canara Robeco AMC he has worked with Pramerica Asset Managers Pvt. Ltd., Hudson Fairfax Group, USA, Principal PNB AMC Pvt. Ltd. and Sun F & C Asset Management Ltd.

Krishna Sanghavi has a qualification of B.Com (H), C.W.A. from ICWAI, Master of Management Studies (Finance) from NMIMS, Mumbai and CFA from ICFAI. He has total experience of 19 years in financial services industry. Prior to joining Canara Robeco AMC he has worked with Kotak Mahindra Mutual Fund. Sanghvi has significant experience in Credit Appraisal Risk Management, Dealer Finance, Business Planning and Fund Management.

 

View:

Canara Robeco Emerging Equities Fund helps you to participate in the growth at an early stage in their life cycle so that you may benefit from the growth in companies in terms of size and market capitalization. It follows a thorough bottom-up stock-picking approach to identify companies It uses a combination of growth-oriented style of investing and the value approach to create a diverse portfolio of fundamentally strong companies. This stock-picking strategy is also known as growth at reasonable price (GARP). We feel that for a Rs 300 crore fund should have a smaller portfolio. This will allow the fund manager to focus on a limited number of holdings. However, the fund may counter this by saying that it tries to reduce the volatility that is commonly associated with mid-cap companies through diversification of its portfolio. Well, we have to admit till now this seems to have helped the fund in both upward and downward markets. The fund is ideal for investors who have an appetite for high risk – high return investments and have a long term investment  horizon.                                                                                                                                                                                                                                          

 
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