Mirae Asset Emerging Bluechip Fund: A Cautiously Managed Midcap Fund - Outside View by PersonalFN

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Mirae Asset Emerging Bluechip Fund: A Cautiously Managed Midcap Fund
Mar 6, 2018

Mirae Asset Emerging Bluechip Fund is one of the most successful schemes of Mirae Asset Mutual Fund. The fund management may have adopted a cautious approach of restricting fund inflows given the high market valuations and liquidity constraints, but it has certainly not disappointed on the returns front. The fund management has been prudent in its decision, thus enabling the scheme to avoid stock investments at unfavourable share prices.

As the name suggests, Mirae Asset Emerging Bluechip Fund focuses on investing in high growth oriented stocks in the mid cap segment. The fund seeks quality businesses that can provide decent growth in the long-term. The midcap fund has consistently been a top quartile performer that has outperformed its benchmark index by distinct margins in the past. Since its inception in July 2010, the fund has grown at 23.40% CAGR and has generated superior risk adjusted returns for its investors.

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Being in existence for a little over 6-years, Mirae Asset Emerging Bluechip Fund's risk management and portfolio strategies have helped it contain the downside during the bear phases and reward its investors by delivering benchmark-beating returns during bull phases. The fund has stayed ahead of most of its category peers and its benchmark index by noticeable margins. In short, the fund management of Mirae Asset Emerging Bluechip Fund has maintained the perfect balance between risk and returns. Thus, often ranking it among the best midcap funds.

Do note, fresh lumpsum subscription/switch-in to all the Plans & Options of Mirae Asset Emerging Bluechip Fund has been temporarily suspended with effect from October 25, 2016. However, fresh Registration through the Systematic Route i.e. Systematic Investment Plan (SIP)/Systematic Transfer Plan (STP)/ Mirae Asset Variable Transfer Plan (VTP) etc. shall be allowed for a maximum of upto Rs 25,000. The said limit of Rs 25,000 through all or any of the Systematic Route shall be applicable at PAN level for each Investor.

In this brief analysis, PersonalFN takes a close look at the features and performance of Mirae Asset Emerging Bluechip Fund.

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Investment Objective of Mirae Asset Emerging Bluechip Fund

Mirae Asset Emerging Bluechip Fund has an investment objective to "to generate income and capital appreciation from a diversified portfolio predominantly investing in Indian equities and equity related securities of companies which are not part of the top 100 stocks by market capitalization and have market capitalization of at least Rs.100 Crores at the time of investment. From time to time, the fund manager may also seek participation in other Indian equity and equity related securities to achieve optimal Portfolio construction"

Mirae Asset Emerging Bluechip Fund Details

Fund Facts
CategoryDiversifiedStyleBlend
TypeOpen endedMarket Cap BiasMid-cap
Launch Date12-Jul-10SI Return (CAGR)23.40%
Corpus (Cr)Rs 5,302Min./Add. Inv.Rs 5,000 / Rs 1,000
Expense Ratio (Dir/Reg)1.64% / 2.46%Exit Load1%
Data as on January 31, 2018.
SI Return as on February 28, 2018.
(Source: ACE MF, PersonalFN Research)

Under normal circumstances, Mirae Asset Emerging Bluechip Fund will allocate...

  • 65% - 100% of its assets in equity and equity related instruments of companies, which are not part of the top 100 stocks by market capitalization, and which have a market capitalization of atleast Rs 100 crores at the time of investment.
  • 0% - 35% in other Indian equities and equity related securities.
  • 0% - 35% in debt securities and money market instruments.

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Growth Of Rs 10,000, If Invested In Mirae Asset Emerging Bluechip Fund 5 Years Back

Had you invested Rs 10,000 in Mirae Asset Emerging Bluechip Fund, 5 years back on February 28, 2013, it would have grown to Rs 38,800. This translates in to a compounded annualised growth rate of a whopping 31.13%. In comparison, a simultaneous investment of Rs 10,000 in its benchmark - Nifty FF Midcap 100 - TRI would now be worth Rs 27,768 (a growth of 22.65% CAGR). The fund has clearly outperformed its benchmark over the period of last 5 years.


Mirae Asset Emerging Bluechip Fund: Year-on-Year Performance

Mirae Asset Emerging Bluechip Fund has a track record of just under eight years. The year on year performance comparison of the fund vis-a-vis its benchmark - Nifty FF Midcap 100 - TRI shows that the fund has outperformed the benchmark in 6 out of last 7 calendar years. In 2017, the performance was in line with the benchmark. As seen in the chart alongside, significant alpha was generated in 2014.

In 2011, Mirae Asset Emerging Bluechip Fund proved its ability to limit losses by a significant extent during a market correction. With the high volatility in 2017, and unjustifiable valuations, the fund has moved cautiously. Nonetheless, it has managed to deliver a return in line with the benchmark. For the year-to-date, the scheme has done well to restrict losses, a time when mid-caps have been tumbling.

Mirae Asset Emerging Bluechip Fund: Performance Vis-a-vis Category Peers

Rolling Period Returns
Scheme NameCorpus (Rs Cr)1 Year2 Year3 Year5 YearStd DevSharpe
SBI Small & Midcap Fund907.942.0126.1731.9733.8317.450.29
DSPBR Micro-Cap Fund6,469.429.9323.7729.6531.2817.330.22
Reliance Small Cap Fund6,542.442.6426.8027.7032.5818.820.23
Mirae Asset Emerging Bluechip Fund5,301.636.4525.6227.6931.0615.270.23
L&T Emerging Businesses Fund4,030.948.7330.7326.630.0017.180.28
Aditya Birla SL Small & Midcap Fund2,021.637.5226.8326.3126.6417.150.22
L&T Midcap Fund2,221.940.3024.6126.2028.3615.550.22
Canara Rob Emerging Equities Fund3,207.935.7521.7125.6629.1217.320.17
Kotak Emerging Equity Scheme3,010.129.2221.0424.7925.6914.950.17
Principal Emerging Bluechip Fund1,668.634.5222.6524.0827.8916.360.18
Franklin India Smaller Cos Fund7,280.128.2821.2923.9630.7014.290.19
Sundaram S.M.I.L.E Fund1,415.834.4219.4723.9526.4420.570.12
Sundaram Select Midcap6,332.429.0220.5923.4426.0115.870.16
DSPBR Small & Mid Cap Fund5,414.429.8621.6022.6824.4616.780.15
Kotak Midcap Scheme845.728.2920.4522.5623.3715.370.16
HSBC Midcap Equity Fund640.833.0820.5022.1124.3019.440.15
Aditya Birla SL Midcap Fund2,483.129.5019.2522.1023.3115.710.14
HDFC Mid-Cap Opportunities Fund20,278.129.7420.7921.9826.0014.400.17
Edelweiss Mid and Small Cap Fund640.230.3517.3821.9426.7015.770.16
MOSt Focused Midcap 30 Fund1,361.619.0713.3221.530.0015.700.06
Franklin India Prima Fund6,669.425.9218.6021.4626.4113.700.14
HDFC Small Cap Fund2,423.337.3523.4221.1622.4016.000.24
SBI Magnum MidCap Fund4,059.619.2515.6221.1427.3114.110.13
BNP Paribas Mid Cap Fund851.428.3117.3721.1125.5716.430.12
Tata Mid Cap Growth Fund703.128.4714.9520.2824.6116.650.09
Nifty Free Float Midcap 100 - TRI 32.2021.5821.0521.1116.540.16
Returns are on a rolling basis and those depicted over 1-Yr are compounded annualised.
Data as on February 28, 2018
(Source: ACE MF, PersonalFN Research)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

On rolling return basis, Mirae Asset Emerging Bluechip Fund is a strong competitor in the mid-cap fund category. It has delivered above average returns across rolling periods of 1-year, 2-year, 3-year and 5-year and has done well to beat its benchmark and most of its category peers by a distinct margin.

But one thing that is unique to Mirae Asset Emerging Bluechip Fund is the risk, measured by standard deviation. The midcap fund is among the schemes with the lowest risk. This along with its ability to generate superior returns makes it one of the top ranking schemes in terms of risk-adjusted returns as well.

Investment Strategy of Mirae Asset Emerging Bluechip Fund

Launched in July 2010, Mirae Asset Emerging Bluechip Fund is mandated to invest at least 65% of its assets in stocks of mid-sized companies, which are not part of the top 100 stocks by market capitalization and have market capitalization of at least Rs 100 Crores at the time of investment.

The fund also has the flexibility to invest up to 35% in large cap stocks (i.e. Top 100 companies by market cap). Equity derivatives can form a maximum of 30% of the fund's net assets. Investments in money market instruments and debt securities can be made up to 35% of the fund's corpus (including up to 20% in securitised debt).

Mirae Asset Emerging Bluechip Fund aims to hold a well-diversified portfolio without having any bias towards particular theme, sector or style while picking stocks for the portfolio. However, the fund manager has flexibility to follow a focussed approach of investing in selective stocks. The fund also aims to avoid liquidity risk and portfolio concentration risk by holding large base of about 50 to 70 stocks in its portfolio. Single stock exposure rarely exceeds the 5% mark.

Adopting a combination of the top down and bottom up approach, the fund manager broadly analyses the macro economy and invest in stocks, which is expected to benefit from macroeconomic, sectoral and industry trends. Mirae Asset Emerging Bluechip Fund doesn't take aggressive cash calls and prefers to stay fully invested with at least 95% equity exposure at all point in time. Largely following buy and hold investment strategy, the fund churns its portfolio moderately

Mirae Asset Emerging Bluechip Fund - Portfolio Allocation and Market Capitalisation Trends

Mirae Asset Emerging Bluechip Fund usually maintains an allocation of 30%-40% to large-caps. However, over the past few months, the scheme has gradually hiked the large-cap exposure to around 55%. Mid-and small-caps in the past ranged between 50%-65% of the assets. In the past 12 months, this exposure has dropped to under 45%. Small caps, which once made up 15% of the portfolio, are down to 6%. The mid-cap exposure stands at 37%, dwon from a peak of nearly 50% in the past year. The cautious stance of the fund house is clearly visible. The fund is moving out of volatile mid-caps and shifting to stable large-caps.

Mirae Asset Emerging Bluechip Fund- Top Portfolio Holdings

Top 10 Stocks
Stocks% of Assets
Tata Global Beverages Ltd.3.84
ICICI Bank Ltd.3.82
Kotak Mahindra Bank Ltd.3.51
Raymond Ltd.3.48
HDFC Bank Ltd.2.99
The Federal Bank Ltd.2.96
Info Edge (India) Ltd.2.95
IndusInd Bank Ltd.2.88
Ceat Ltd.2.84
Havells India Ltd.2.83
Top 5 Sectors


Mirae Asset Emerging Bluechip Fund maintains a well-diversified portfolio of shares. The portfolio constitutes of about 63 holdings. The top 10 holdings account for about 32% of the total assets. Tata Global Beverages, ICICI Bank, Kotak Mahindra Bank, Raymond and HDFC Bank are among the top holdings. The allocation is not skewed to a specific set of stocks. No stocks in the portfolio have a weightage in excess of 4%.

Amongst the sectoral holdings, Banks lead the list with a total exposure of 20.5%. Consumer non-durables and Auto Ancillaries stocks account for 8%-9% each. Pharma stocks follow behind with an allocation of around 7%. Financial stocks (excluding banks) gain a weightage of 5%.

Top Gainers in Mirae Asset Emerging Bluechip Fund's portfolio

Among the top stocks in Mirae Asset Emerging Bluechip Fund's portfolio were Tata Global Beverages, Raymond, GOCL Corporation, Voltas and InfoEdge. These stocks generated returns of 125%, 111%, 102%, 85% and 65% respectively in the past one year period. Of these, four stocks are among the top 10 holdings with an individual allocation of around 3%-4%.

Among other contributors to the fund's returns were Cera Sanitaryware, Tata Steel, Ceat, JK Cement and Thermax. These stocks delivered a return in the range of 50%-60% over the past year.

Suitability of Mirae Asset Emerging Bluechip Fund

PersonalFN is of the view that, mid and smallcap space, although has corrected, the margin of safety is not conducive, unless you hold a very high risk appetite. If Indian equities tumble due to any global and/or domestic factors, the mid and smallcap space are bound to take beating, in fact by a greater magnitude than large caps, especially in an environment where corporate earnings have fallen short of market expectations.

Hence, it's better to be very selective in you approach while building your investment portfolio. Prefer mutual fund schemes which follow strong investment follow robust investment processes and systems, as against those indulging in momentum playing. Also, in the current scenario, staggering would be a better strategy, as it can help manage downside risk. If you're addressing long-term financial goals, opting for Systematic Investment Plans (SIPs) offered by mutual funds would help you mitigate risk as you invest in equities.

Midcap stocks tend to have a higher growth potential. They are often less researched and hence, more often, available at a discount to the largecaps. Investment in midcaps can be rewarding over a longer term, as they need considerable time to grow in size. Though midcaps are often referred as the future largecaps, very few companies actually manage to zoom past the competitors. These companies are not as stable as the large sized companies and at times struggle to sustain when the going gets tough. For this reason, investment in midcaps is considered to be highly risky. But investment in mid-caps could be well-rewarding over the long-term, provided you hold a very high risk appetite

Being a mid-cap focused fund Mirae Asset Emerging Bluechip Fund is certainly suitable for investors having high-risk appetite with longer time horizon. The fund adopts sound risk management strategies and does not compromise on quality in order to generate higher returns. The fund has clear demarcation of stocks it aims to invest in and stays away from low quality stocks and micro sized companies who can be candidate of higher risk.

Mirae Asset Emerging Bluechip Fund has been generating superior returns ever since inception, and has performed steadily across market cycles. However, investors should clearly understand their risk appetite, before taking exposure in mid cap funds.

Note: This write up is for information purpose and not a recommendation to buy or sell the mutual fund scheme. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor.

Editor's note:

If you're unsure where to invest fresh investible surplus currently, to strike the correct risk-return trade-off we recommend adopt a 'core and satellite approach' to investing. Here are 6 benefits of 'core and satellite approach':

  • Facilitates optimal diversification;
  • Reduces the risk to your portfolio;
  • Enables you to benefit from a variety of investment strategies;
  • Aims to create wealth cushioning the downside;
  • Offers the potential to outperform the market; and
  • Reduces the need for constant churning of your entire portfolio

'Core and satellite' investing is a time-tested strategic way to structure and/or restructure your investment portfolio. Your 'core portfolio' should consist of large-cap, multi-cap, and value style funds, while the 'satellite portfolio' should include funds from the mid-and-small cap category and opportunities style funds.

But what matters the most is the art of astutely structuring the portfolio by assigning weightages to each category of mutual funds and the schemes you select for the portfolio.

Moreover, with change in market outlook the allocation/weightage to each of the schemes, especially in the satellite portfolio, need to change.

Keep in mind: Constructing a portfolio with a stable core of long-term investments and a periphery of more specialist or shorter-term holdings can help to deliver the benefits of asset allocation and offer the potential to outperform the market. The satellite portfolio provides the opportunity to support the core by taking active calls determined by extensive research.

So, PersonalFN offers you a great opportunity, if you're looking for "high investment gains at relatively moderate risk". Based on the 'core and satellite' approach to investing, here's PersonalFN's latest exclusive report: The Strategic Funds Portfolio For 2025 (2018 Edition).

In this report, PersonalFN will provide you with a readymade portfolio of its top equity mutual funds schemes for 2025 that have the ability to generate lucrative returns in the long run. PersonalFN's "The Strategic Funds Portfolio for 2025" is geared to potentially multiply your wealth in the years to come. Subscribe now!

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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1 Responses to "Mirae Asset Emerging Bluechip Fund: A Cautiously Managed Midcap Fund"

AJAY BIDKAR

Mar 19, 2018

Very informative and elaborative

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