Canara Robeco Emerging Equities Fund Review: Will this work in future?

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This is a performance review of Canara Robeco Emerging Equities Fund. We compare fund returns and risk with benchmark and large and mid cap peers. Started in March 2005 as a mid cap fund, it changed to a large and mid cap fund in May 2018. Value Research continues to rate it as it probably had a large cap tilt before the recategorization.

Canara Robeco Emerging Equities with an AUM of ~ 4,190 crores is at the fourth spot in the large and mid-cap category. Interestingly, Mirae at the top spot has only ~ 6,444 Crores. So this is a good place to shop for a low AUM single portfolio fund. I have already reviewed Mirae Emerging Bluechip Fund Review: Why new investors should avoid.  Readers can also access the entire mutual fund reviews archive.

Canara Robeco Emerging Equities Fund: Investment Strategy

The fund can now invest in large cap and mid cap stocks individually between 35-65%. This means that at any given time, 70% of the portfolio will have equity equally divided between large cap and mid cap stocks.

The fund will select companies with a strong competitive position in good businesses with quality management and scope for good growth over
time. According to the scheme document, The fund shall choose stocks with (not a full list)

  1. with ROE or ROCE (or with such potential)
  2. companies that can handle competition well
  3. with high growth potential
  4. associated with niche businesses with a high and growing profit margin
  5. of research-driven companies and those with value-added services

Canara Robeco Emerging Equities Fund Review: Will this work in future?

Old benchmark: NIfty 100 Midcap TRI

New benchmark: NIFTY Large Midcap 250 TRI

This is a big change in the benchmark. Investors who have held the fund for several years must recognise that the fund will not be able to reproduce past returns as it is no longer a mid cap fund.

Canara Robeco Emerging Equities vs Benchmarks

Now let us, as usual, proceed to compare the funds return and risk with benchmarks. Warning: the performance shown here is from the past when the fund was a mid cap fund. You cannot expect the same outperformance in future.

We shall look at returns and risk (standard deviation) from every possible 10,7,5, and 3 year period for Canara Robeco Emerging Equities  and S & P  BSE Large Midcap TRI and Nifty Next 50 TRI. Please observe the graphs closely. Observations are found below.

10-year rolling returns and risk

Canara Robeco Emerging Equities 10 year rolling returns and risk comparison with benchmarks

7-year rolling returns and risk

Canara Robeco Emerging Equities 7 year rolling returns and risk comparison with benchmarks

5-year rolling returns and risk

Canara Robeco Emerging Equities 5 year rolling returns and risk comparison with benchmarks

3-year rolling returns and risk

Canara Robeco Emerging Equities 3 year rolling returns and risk comparison with benchmarks

Observations

According to Morningstar, the fund has seen 13 fund managers!! Among these, the outperformance seen above seems to coincides with Ravi Gopalakrishnan who managed the fund for the longest duration – 6 years right up to the reclassification last year. From the 3 year graph, one can see that the performance in the last couple of years has not been great with respect to both indices with the fund’s volatility almost equal to that of Nifty Next 50.

Also, the fund has an outperformance window only from mid-2013. Overall, although it has done well recently, it is has done so at higher volatility. It would be hard to label this as a consistent performer.

Canara Robeco Emerging Equities vs Peers

We shall now compare Canara Robeco Emerging Equities Fund with DSP Equity Opp, Mirae Asset Emerging Bluechip, ABSL Equity Advantage, Invesco India Growth Opp funds

7-year rolling returns and risk

Canara Robeco Emerging Equities 7 year rolling returns and risk comparison with peers

5-year rolling returns and risk

Canara Robeco Emerging Equities 5 year rolling returns and risk comparison with peers

Observations

It should be clear that Canara Robeco Emerging Equities has a comparable return profile with Mirae Asset Emerging Bluechip and both have comfortably beat the other peers compared. However, Canara Robeco Emerging Equities is a bit more volatile than the Mirae fund.

Summary: Will this work in future?

Too many fund manager changes, not a consistent track record and a recent increase in volatility even though it had a large cap tilt before the re-classification make it hard for me to recommend this to new investors. My reasoning is the same as that for Mirae Emerging Bluechip (see video below). We will need to wait and watch this how this fund behaves like a large and mid cap fund.

Existing investors need not worry after reading this review. They can keep track of performance from the date of investment and take a suitable call. I think this fund may need a bit more than 3 years to work. However, if it can beat the benchmark only by taking on more risk, then it is not a fund that I would choose.

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5 Comments

  1. A request – can you generate the graphs with different colour combination? Blue on black background is extremely hard to read. Would it be possible to change the blue to a brighter variant of blue [e.g., #6fe4f2]?

  2. Sir, I am 50years old. I want to withdraw money from my PPF A/c and transfer it to some good aggressive balanced fund. Is this a good move? If yes, kindly recommend some good equity oriented balanced fund.
    Thanks
    Sanjay

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