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Funds in the large- and mid-cap category are an ideal fit for investors who like the stability of large-caps but at the same time look for a boost in their returns through some exposure to mid-cap stocks. Introduced after SEBI’s new scheme categorisation norms, funds in this category invest a minimum of 35 per cent of their total assets in large-caps and a minimum of 35 per cent in mid-caps.
Mirae Asset Emerging Bluechip, an erstwhile mid-cap fund that now falls in this category, is a good bet in this space. The fund is now benchmarked to the Nifty LargeMidcap 250 index instead of the Nifty Free Float Midcap 100 index earlier.
Performance and strategy
Over longer periods of three and five years, Mirae Emerging Bluechip boasts of robust annual returns of 17 per cent and 28 per cent, respectively. It also beats the Nifty LargeMidcap 250 by a comfortable margin in these time-frames. The scheme emerges the top performer among all funds in the large- and mid-cap category in both three- and five-year periods.
However, such a direct comparison may not be really fair. The newly created category comprises funds which were in various other categories until a few months ago. For instance, it consists of funds such as Franklin Flexi Cap and Aditya Birla Sun Life Equity Advantage, which earlier were multi-cap funds; and Reliance Vision, ICICI Pru Top 100, HDFC Large Cap which were earlier large-cap funds.
Mirae Emerging bluechip is among a few from the mid-cap stable to be reclassified into large- and mid-cap. Thus, the fund’s higher returns may be due to its heightened mid-cap exposure from earlier, and hence, investors may have to brace for a slight moderation in returns henceforth.
During the iffy markets of 2015 and 2016, the fund reduced exposure to equites to cut losses. However, it has remained almost fully invested in equites in 2018 at a time when the markets have been highly volatile, and mid- and small-caps have dropped sharper than large-caps. These could be the reasons for the fund marginally trailing the benchmark over the past year.
Portfolio choices
Following the reclassification, the fund has brought down its mid- and small-cap exposure — it’s been about 50 per cent of the portfolio since mid-2018. In the few months prior to this, it was at a higher 60-70 per cent.
Mirae Emerging Bluechip has upped its stake in banking, its most preferred sector, in the last one year. Besides, the fund is playing defensive with consumer non-durables, it being the next preferred sector after banking. It has also rightly added to its software holdings during the year to benefit from the revival in global demand in the sector as well as rupee depreciation. Consumption stocks such as Colgate, Maruti Suzuki and Titan are recent additions.
It is noteworthy that while the fund has undergone a category change, Nilesh Surana, who has been successfully managing it since inception, continues to helm the scheme.
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