Canara Robeco Emerging Equities Fund: a consistent performer in large & mid cap space

Canara Robeco Emerging Equities Fund, the third largest scheme in the large & mid cap category, managed to stay in the top quartile in six out of the last 10 calendar years.

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Canara Robeco Emerging Equities Fund, the third largest scheme in the large & mid cap category, has consistently outdone its benchmark and peers. The scheme has managed to stay in the top quartile in six out of the last 10 calendar years. It is the topper in the last five- and 10-year periods, with 13% and 18% returns respectively.

In the last one- and three-years, the scheme has delivered 6.33% and 7.79% vs the category average of -0.38% and 1.14% respectively.

The scheme manages assets worth Rs 4,980 crore.


However, the scheme has a poor record of managing the downside. According to Morningstar, Canara Robeco Emerging Equities Fund has a downside ratio of more than 100. In other words, the scheme has lost more than the index in the down-markets in the last three years.

The fund house blames the listless mid and small cap stocks for it. “If you see mid and small cap stocks, where the fund has a higher allocation, have underperformed meaningfully their large cap peers. But in the last three years the fund has outperformed the index and remained in the 1st quartile,” says Miyush Gandhi, Fund Manager, Canara Robeco Mutual Fund.

There was some change in the fund management team of Canara Robeco Emerging Equities Fund recently. Krishna Sanghavi, Head-Equities, Canara Robeco Mutual Fund and co-manager of the fund, quit the organisation. Shridatta Bhandwaldar replaced him from 1st October.

Will the change in fund manager hit the scheme’s performance? Miyush Gandhi does not think so.

He says, “While we have seen some changes in the fund management team, the underlying investment philosophy and process continues to remain the same.”

This was Krishna Sanghvi’s second stint as fund manager of this scheme. His second round with the fund was a short one-year span. He joined the AMC last year in August. During his period, the fund made returns of 6.46% as against 9.66% delivered by the index, shows Morningstar.

Also, the fund has seen many changes in its fund management since its launch in March 2005. According to Morningstar, it has seen 14 fund manager changes till date. This clearly shows that the superior performance of the scheme is not linked to a fund manager.
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The scheme is heavily invested in the banking sector (26%), followed by 8% in pharma companies. The fund manager believes within banks, private sector banks are in a sweet spot.

“On the liability side, the liquidity in the system is abundant and cost of fund is reducing while on the asset side competition from NBFC’s for retail assets and PSU banks for corporate assets is moderating,” says Miyush Gandhi. For a detailed interview, click: Diversification is in-built in the large & mid cap category, says Miyush Gandhi of Canara Robeco Mutual Fund
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The fund is a healthy investment for an investor who understands the risks of investing in mid cap stocks, as large & mid cap schemes have a mandate to invest a minimum 35% in mid cap stocks. Currently, the scheme has 40% of its portfolio in mid cap stocks, and 52% in large cap stocks.

Existing investors can also continue to invest in the scheme in systematic manner through regular SIPs.
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