Mirae Asset Emerging Bluechip Fund: An investor’s delight
At investment-mantra.co.in, we have evaluated quality ELSS Fund in Axis Long Term Equity Fund, a quality mid-cap fund in HDFC Mid-cap Opportunities Fund, a quality large cap equity fund in ICICI Prudential Focused Bluechip Equity Fund. This week we evaluate another star performer from small and mid-cap space in Mirae Asset Emerging Bluechip Fund.
Investment Type: Open Ended Equity Fund
Fund Category: Small and Mid Cap
Investment Thesis: Mirae Asset Emerging Bluechip Fund is an open ended equity scheme with an aim to provide an opportunity to tap into the value of today’s mid and small sized companies which have the potential to perform well in the coming years.
Fund Inception Date: 09th July 2010
Closing AUM: 3,888.46 Crores (May 2017)
Fund Manager: Mr. Neelesh Surana (since inception of the fund)
Scheme benchmark is: Nifty Free Float Midcap 100
Scheme Additional benchmark is: S&P BSE index
Source: Mirae Asset Mutual Fund Website (Data as on May 2017)
SECTORAL ALLOCATION & PORTFOLIO ALLOCATION
The fund has broad investment horizon and is actively managed. The fund manager looks for companies with strong management pedigree, competitive advantage in the market, backed by strong fundamentals, strong return on capital and clean balance sheets. Fund avoids companies with weak cash flows. The fund does not invest in companies that generate less than Rs 80-100 crore cash per annum.
In line with other funds in the category, the fund has at present a significant allocation to Banks which stands at 16.08%. The fund manager has a well-diversified portfolio with Auto Ancillaries, Industrial Products, Chemicals, Finance, Consumer Non-Durable, Textile products are also sectors with notable allocation.
As regards the top 10 holdings, 4 banks figure among the top 10 (Federal Bank, Kotak Mahindra Bank, IndusInd Bank, ICICI Bank). Quality businesses such as Voltas, Grasim and Tata Chemicals also figure in the top 10 list. The top 5 stocks constitute 18.27% of the overall portfolio signifiying ample diversification. Further, the fund has close to 60 stocks in the portfolio which makes it well diversified.
Britannia Amara Raja Batteries, Vinati Organics, Hindustan Petroleum and Gateway Distriparks are some of the stocks which have done well for the fund in the past.
|Sector||Allocation (in %)|
Stock portfolio allocation as of May 2017 is as follows:
|The Federal Bank Limited||Banking/Finance||3.84|
|Kotak Mahindra Bank Limited||Banking/Finance||3.63|
|IndusInd Bank Limited||Banking/Finance||3.61|
|ICICI Bank Limited||Banking/Finance||3.58|
|Tata Chemicals Limited||Chemicals||2.98|
|Motilal Oswal Financial Services Limited||Banking and Financial Services||
|Grasim Industries Limited||Conglomerates||2.73|
|Natco Pharma Limited||Pharmaceuticals||2.69|
While evaluating any fund’s performance, more than star rating or 1- year, 3- year or even a five year graph – consistency of fund during all market cycles really separate excellent consistent-performing funds from the rest. There are funds which can be kind of flavor of the season and sectoral tailwind also takes them up in the top quartile as regards performance for that particular year. But such funds can be in for big losses during a market downturn. So consistency is of utmost significance in the long run rather than short bursts of performance.
Mirae Asset Emerging Bluechip Fund is synonym to consistency till date with excellent performance in each of the following years post launch till date.
|Nifty Free Float Midcap 100||S & P BSE Sensex|
As you can see in above table, fund have been very consistent with its performance year on year.
The immediate year post its launch was a challenging one for the equity markets with the Category(Small/Midcap) returning negative returns of -25.67%. The fund contained losses to -15.15%. Since then there has been no looking back and by each passing year, it has earned respect of investor community with consistent returns and low volatility factor.
A big credit for such a superlative performance can be attributed to the fund manager who been managing the fund since its launch. The fund manager look for quality stocks in different sectors and stays put.
SIP performance since inception is nothing but phenomenal. Fund has beaten its benchmark in each year since inception.
|SIP investment||Since Inception||5 Years||3 years||1 Year|
|Total Amount Invested||8,20,000||6,00,000||3,60,000||1,20,000|
|Market Value as On 31st May, 2017||22,67,076||13,55,121||5,36,732||1,44,322|
|Fund return (%)||29.40%||33.31%||27.77%||39.81%|
|Benchmark Return (%)||17.68%||21.51%||18.62%||26.41%|
|Add Benchmark Return (%)||10.46%||11.46%||9.29%||21.59%|
Past performance may or may not be sustained in future. The SIP returns are calculated by XIRR approach assuming investment of 10,000/- on the first working day of the month
Facts and Figures (Power of compounding)
If you would have invested via SIP in Mirae Emerging Bluechip Fund – Regular Plan (Growth) of 5000 per month since its inception till date (July 12, 2010 to May 12,2017) , your investments of 4,15,000 would have translated to corpus of 11,51,431 today giving handsome SIP Returns (CAGR) of a whooping 29.71%.
Performance Report ( Regular Plan – Growth)
In the last five year alone, the fund has delivered a phenomenal return of 33.51% CAGR with 5000/- SIP running from June 10, 2012 to June 10, 2017 would have appreciated total investment value of 3,05,000 to a neat 6,86,486.
|Period||MAEBF (%)||Scheme Benchmark (%)||Additional Benchmark (%)|
|Last 1 Year||41.63||31.73||16.79|
|Last 3 Years||31.71||19.93||8.73|
|Last 5 Years||32.79||20.47||13.93|
|Value of Rs. 10,000 invested in (Rs.) per inception||45,292||21,093||17,465|
A beta of less than 1.0 indicates that the investment will be less volatile than the market, and, correspondingly, a beta of more than 1.0 indicates that the investment’s price will be more volatile than the market. Fund’s beta of .90 indicates superior risk-reward ratio.
Sharpe Ratio : 1.73
Portfolio Turnover Ratio: 0.89 times
Information Ratio : 2.20
THINGS TO WATCH OUT FOR:
Though fund performed exceedingly well in the year 2011, the fund has yet to see a cycle of a steep correction. How it fares during severe market downturn in comparison to its peers and the benchmark is yet to be seen.
Fund manager Mr. Neelesh Surana is the backbone of the fund. Any change in the fund manager going forward needs to be watched out for by the investors. Do remember one such instance of IDFC Premier Equity earlier managed by star fund manager Kenneth Andrade.
The increase in fund AUM – With the fund exhibiting excellent performance and the rally in mid and small cap stocks, the fund has seen consistent inflows. What strategy fund manager adopts here needs to be watched out for.
Fund beta is less than 1 indicating superior risk-reward ratio. Any change in fund strategy to take more risks in lieu to generate more returns needs to be watched out for.
COMMON PITFALLS TO AVOID:
Booking out too soon – If you have this fund mapped to your long-term goals such as retirement, child education and marriage and goal is still more than 5 years away, stay put. Investors normally get excited by the phenomenal run fund has experienced and book out with profits in the process. If the fund is performing well and your goal is still a substantial amount of years away, there is no need to book out.
Looking at NAV daily – Leave it alone. Do monitor your fund’s performance for sure every 6 months but don’t look at NAV daily.
Dumping other large and mid cap funds for this fund – Even within mid-cap funds, there is whole host of funds which have different investment mandate or have relative less proportion to small and mid cap stocks or take relative less risks. So don’t just compare outright returns and dump other funds for this fund. You need a Dravid (funds such as HDFC Mid-cap Opportunities) also in the team along with Yuvraj Singh.
Forgetting the fact that small and mid cap funds tend to be more volatile – Though volatility is investor’s best friend in the long term, investors who are risk averse or have the goal not far away should be aware of the fact that the fund is after all a small and mid cap fund with a high risk.
Not monitoring fund’s performance – Irrespective of how well a fund is doing, its performance must be evaluated every 6-8 months. Assumptions can sometimes go terribly wrong in equity markets.
New first time investors investing in this fund – First time investors should avoid this small and mid cap fund irrespective of its tremendous performance. They should look at Balanced, Large cap and Multi-cap funds first to being investing in mutual funds.
IS THE FUND WORTH INVESTING?
Fund is still a relatively young fund from the perspective of an equity mutual fund but its return has been exceptional till date. Above data points shared with investors should help investors to take a suitable decision as to invest in the fund or not. Do note that Fresh lumpsum subscription/switching to all the Plans & Options of Mirae Asset Emerging Bluechip Fund (MAEBF) through any mode including Stock Exchange platform has been temporarily suspended with effect from October 25, 2016. This is the hallmark of a great management team who is not after increasing AUM for AMC alone but also knows how to safeguard interests of their existing investors. Since mid and small cap stocks have seen a steep run, the fund house has restricted fresh lumpsum investments in the fund due to the scarcity of quality businesses trading at reasonable if not cheap valuations. The fund review will be incomplete without mention of its fund manager Mr. Neelesh Surana who has nurtured the fund since its inception with extreme precision benefiting its investors in the process. Long-term investors need to stay put in case of a steep correction to benefit from lower NAV and power of compounding.
Since mid and small cap stocks have seen a steep run, the fund house has restricted fresh lumpsum investments in the fund due to the scarcity of quality businesses trading at reasonable if not cheap valuations. The fund review will be incomplete without mention of its fund manager Mr. Neelesh Surana who has nurtured the fund since its inception with extreme precision benefiting its investors in the process. Long-term investors need to stay put in case of a steep correction to benefit from lower NAV and power of compounding.
Disclaimer: The author has investments in Mirae Emerging Bluechip Fund via SIP mode and opinion may be biased. The write-up is for information purpose only and is not a recommendation of any sort to the readers. Mutual funds are subject to market risks. Please consult your financial advisor before taking any financial decisions.