Mirae Asset Emerging Bluechip Fund: Best Large and Midcap Fund in the last 5 years

In the last 5 years, Mirae Asset Emerging Bluechip Fund has emerged as the best performer in the large and midcap equity funds segment (please see top performing large and midcap funds in our MF Research section).

For the benefit of readers who are not aware of different mutual fund categories, SEBI has defined the Large and Midcap category as the set of mutual fund schemes which invests primarily in the top 250 companies by market capitalization. The top 100 companies by market capitalization have been classified as large cap companies, while the next 150 companies are classified as midcap companies. SEBI mandates large and midcap funds to invest minimum 35% of their AUM in large cap stocks and minimum 35% in midcap stocks. The risk profile of this category is midway between large cap and midcap funds.

Given the fairly broad nature of the mandate, fund managers of Large and Midcap schemes have the flexibility to shift substantial allocations from midcap to large cap and vice versa, depending on their market outlook. Mirae Asset Emerging Bluechip Fund which had more than 50% allocation to mid cap stocks a couple of years back, now has more than 55% allocation to large cap stocks.

We reviewed this fund in July 2016 when it was a mid cap fund

Returns since inception

If you had invested Rs 1 lakh lump sum in the NFO of Mirae Asset Emerging Bluechip Fund around 8 years back, your money would have multiplied nearly 5 times to over Rs 4.8 lakhs at a CAGR of 20.7%. This is indeed extraordinary performance, because it was not all smooth sailing for the equity marketin the last 8 years. The correction of 2011 affected all segments while the correction of 2015 affected large cap stocks the most and the correction in 2018 has affected midcap stocks severely.

The SIP performance of Mirae Asset Emerging Bluechip Fund is even better. With a monthly SIP of Rs 5,000 in Mirae Asset Emerging Bluechip Fund from its inception, you would have accumulated nearly Rs 13.27 lakhs by July 7th 2018 against your investment of Rs 505,000 only, an annualized return (XIRR) of over 22% (please the SIP calculator of Mirae Asset Emerging Bluechip Fund).

Fund Overview

The scheme was launched in July 9, 2010. The Assets under Management (AUM) of this scheme multiplied several times in the last couple of years and not stands at has around Rs 5,800 Crores. The expense ratio of the fund is 2.07%. Neelesh Surana, CIO – Equity of Mirae Assets Global Investments (India) is the fund manager of this scheme. The chart below shows the trailing annualized returns of the Mirae Asset Emerging Bluechip Fund, large and midcap funds category and benchmark (Nifty Large and Midcap 250 TRI) over various time-scales. You can see that the scheme was able to beat the category and the benchmark across different time-scales.

Source: Advisorkhoj Research

The chart below shows the annual returns of the Mirae Asset Emerging Bluechip Fund, large and midcap funds category and benchmark over the last 5 years. You can see that the scheme has outperformed the category and benchmark every year over the last 5 years.

Source: Advisorkhoj Research

The chart below shows the NAV movement of Mirae Asset Emerging Bluechip Fund since inception. You can see that the NAV has consistently grown faster than the market till 2017. Many of our readers know that, 2018 saw a very volatile market and it has been particularly difficult for the midcap and small cap market segments. Despite having a higher proportion of allocation in midcaps relative to the market benchmark, the scheme has been able to limit downside performance.

Source: Advisorkhoj Research

Rolling Returns

While Mirae Asset Emerging Bluechip Fund has delivered strong outperformance both in terms of trailing and yearly returns, the rolling returns (which we think is the best performance measure) of the fund is simply outstanding. The chart below shows the 3 year rolling returns of Mirae Asset Emerging Bluechip Fund over the last 5 years. We have chosen a three year rolling returns period, because investors must have a long investment horizon for investing in equity funds.

Source: Advisorkhoj Rolling Returns Calculator

You can see that, over the last 5 years, the scheme has not only consistently beaten the benchmark. The average 3 year rolling return of the scheme over the last 5 years was 24.6%, while the median 3 year rolling return of the scheme over the last 5 years was 23.8%. The maximum 3 year rolling return of the scheme over the last 5 years was 38.5%, while the minimum 3 year rolling return of the scheme over the last 5 years was 13.3%. The strong rolling returns shows that this scheme has been a wealth creator for investors.

The chart below shows the 3 year rolling returns of Mirae Asset Emerging Bluechip Fund versus the Large and Midcap Funds category.

Source: Advisorkhoj Rolling Returns Calculator

You can see that the scheme was consistently able to beat the category rolling returns. The annualized 3 year rolling returns of Mirae Asset Emerging Bluechip Fund was more than 15% around 97% of the times in the last 5 years.

In comparison, the large and midcap category on an average gave 15%+ annualized 3 year rolling returns 42% of the times in the last 5 years. The annualized 3 year rolling returns of the scheme was more than 20% around 65% of the times in the last 5 years, versus 15% of the times for the large and midcap funds category.

The strong rolling returns performance of the scheme shows why Mirae Asset Emerging Bluechip Fund is considered to be among the best performers in the large and midcap funds category across multiple parameters. We must however, caution investors not to take past returns as assurance of future returns because mutual funds are subject to market risks and past returns may not be indicative of future returns. We discuss past performance of schemes in our blog from the perspective of performance comparison with the market and the product category.

Portfolio Construction

For Mirae Asset Emerging Bluechip Fund, the fund manager looks for companies with scalable business models, sustainable competitive advantage and strong management teams. The fund manager looks for companies which generate good return on capital employed (ROCE) and free cash flows (please read our post, Importance of Return on Capital Employed in Equity Investing). In addition to high earnings growth potential and visibility, the fund manager also seeks for price value gap in stock selection. The chart below shows the top sector allocations and top company concentration of the scheme.

Source: Advisorkhoj Research

Lump Sum and SIP Returns

The chart below shows the growth of Rs1 lakh lump sum in Mirae Asset Emerging Bluechip Fund (Growth Option) over the last 5 years (period ending Dec 7, 2018).

Source: Advisorkhoj Research

You can see that your investment would have multiplied more than 3 times in value over the last 5 years. You can also see that, the fund beat the benchmark return by a wide margin. The chart below shows the return of Rs 5,000 monthly SIP in Mirae Asset Emerging Bluechip Fund (Growth Option) over the last 5 years (period ending Dec 7, 2018).

Source: Advisorkhoj Research

You can see that, with a monthly SIP of Rs.5,000 in Mirae Asset Emerging Bluechip Fund, you could have accumulated a corpus of nearly Rs.4.7 lakhs by now. In other words, on a cumulative investment of Rs.3 lakhs, you would have made a profit of nearly Rs.1.7 lakhs.

Dividend Pay-out Track Record

The dividend option of Mirae Asset Emerging Bluechip Fund has been paying regular dividends for the last 4 years. The dividend yield is quite good and there has been substantial price (NAV) appreciation in the dividend option as well. However, investors should know that mutual fund dividends are paid from the accumulated profits of the scheme. There is no guarantee that the fund house will maintain the dividend pay-out rate (dividends per unit) in the scheme. There is also no assurance that dividends will be paid every year.

Conclusion

Mirae Asset Emerging Bluechip Fund has been an outstanding performer in the last 8 years or so. Investors should have a long investment horizon when investing in this large and midcap fund. Investors should have a long investment horizon for this scheme, for their long term financial goals like retirement planning, children’s education, children’s marriage, wealth creation etc.

In our view, a minimum 3 year tenor is required for this scheme, but to get the best results investors should plan on holding this scheme for at least 5 years or longer. Investors should consult with their financial advisors, if Mirae Asset Emerging Bluechip Fund is suitable for their investment portfolios.