Consistent performance across market cycles

Launched in September 2003, Canara Robeco Equity Diversified Fund has been ranked 'CRISIL Fund Rank 2' (a slot among the top 30 percentile indicates good performance) in the diversified equity category of the CRISIL Mutual Fund Ranking for the quarter ended March.

The fund, with average assets under management of Rs 622 crore for the quarter ended June, is managed by Soumendra Nath Lahiri.

The fund has been in the top 30 percentile of the group for eight of the past nine quarters, barring the quarter ended December 2010. Over the past four quarters, too, it stood among the top 30 percentile in the category of consistent equity fund performers, which looks at performances over a longer term.

Performance
The fund has delivered good returns, outperforming both its benchmark (Bombay Stock Exchange 200) and its category average over the one-, two-, three-, five- and seven-year periods. Over the past three years, the fund has given returns of 14.06 per cent, compared with 5.80 per cent and 9.78 per cent by its benchmark and its category, respectively.

An investment of Rs 1 lakh since the fund's inception would have appreciated to Rs 5,45,400 as of June 25. An equal amount invested in its benchmark would have returned Rs 3,74,839, while its category would have yielded Rs 5,06,027 during the same period.

Under the systematic investment plan route, too, it fared well. A monthly investment of Rs 1,000 over five and seven years would have grown to Rs 79,537 and Rs 1,30,427, yielding a compound annual growth rate (CAGR) of 11.27 per cent and 12.39 per cent, respectively. A similar investment in the benchmark would have risen to Rs 65,211 and Rs 1,03,190, CAGRs of 3.3 per cent and 5.81 per cent, respectively.

During the crisis period of January 2008 to March 2009, the fund declined at a rate lower than the benchmark’s (46 per cent, against 50 per cent). Between January 2011 and June 2012, when the markets were volatile, it declined at four per cent, compared with the benchmark’s 13 per cent fall. And, during the sharp market recovery from April 2009 to December 2010, the fund substantially outperformed the benchmark (64 per cent returns, against the benchmark’s 56 per cent returns).

Investment style
The fund plans to adopt a bottom-up strategy of stock picking, focusing on the company’s business fundamentals, industry structure, management quality and financial strength. Some of the stocks retained by the fund over the past three years, which outperformed the BSE 200 during this period, are HDFC Bank, State Bank of India, BPCL, Cadila Healthcare and GAIL.

At the industry level, banking has been the most favoured sector over the past three years, with an average 19 per cent exposure, followed by software and pharmaceuticals with nine per cent and 8.92 per cent, respectively. The fund has been overweight on banks (over four per cent) and pharma (over two per cent) compared to its category during the same period. This has also contributed to better returns.

Canara Robeco Equity Diversified Fund primarily focuses on large-cap and mid-cap companies with strong fundamentals. The average exposure to CRISIL-defined large-cap stocks (top 100 stocks based on average market capitalisation on the National Stock Exchange) over the past three years was 77 per cent. The fund has actively managed its equity exposure through a low average large-cap exposure of 68 per cent from June 2009 to May 2010, when markets recovered after the sub-prime crisis. It increased its exposure to large-cap stocks to an average of 84 per cent during June 2011 to May 2012 - when the markets were volatile.

The fund held an average of 46 stocks over three years, with the top five stocks of the fund accounting for 24 per cent of the portfolio over the same period, compared to its category, which held 45 stocks, with the top five stocks accounting for 27 per cent of the portfolio.

 

CRISIL Research