Canara Robeco Focused Equity Fund: Long Term Consistent Returns

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Current Market Scenario

The market has been volatile for the past 4 months. INR depreciation, weaker than expected corporate earnings and concerns following trade policies of new US Administration have led to heavy Foreign Institutional Investor (FII) sell-off. Nifty 50 has corrected by more than 13% from its 52-week high. The market rebounded briefly after a favourable Union Budget which provided relief to the middle class through tax cut. However, the bear grip on the market has intensified in past few weeks due to concerns about the trade policies of the new Trump Administration.

Valuation scenario

The sharp correction has brought down valuations across all the market cap segments. Large cap valuations seem reasonable. Though mid and small cap valuations have moderated, there are concerns whether current valuation levels are justified given earnings growth concerns.

Mutual Fund - The sharp correction has brought down valuations across all the market cap segments

Source: National Stock Exchange, as on 28^th February 2025

In such a scenario, Canara Robeco Focused Equity Fund may offer diversified portfolio with relative stability and reasonable risk adjusted returns over sufficiently long investment horizons for the investors.

What are Focused Funds?

Focused funds are equity mutual fund schemes that invest in maximum 30 stocks (as per SEBI's mandate). There are no market cap restrictions for these funds, in other words, they can invest across market capitalization segments. Though focused funds have higher concentration risks compared to more diversified funds which invest in a larger portfolio of stocks (e.g. 50 – 60 stocks), slightly concentrated holdings allow the fund manager to allocate higher weights to high conviction stocks which have the potential of creating alphas for investors over long investment horizon. Each stock has the potential to contribute significantly to the scheme's overall performance. Adding a focused fund to your equity mutual fund portfolio may potentially increase portfolio returns. In this article, we will review Canara Robeco Focused Equity Fund, which has a strong track record of creating alpha for its investors.

Canara Robeco Focused Fund Vs benchmark performance

Canara Robeco Focused Equity Fund was launched in May 2021 and has beaten its benchmark index since the inception of the fund. The fund has also outperformed the benchmark index over different investment periods.

Mutual Fund - It was launched in May 2021 and has beaten its benchmark index since the inception of the fund.

Source: Advisorkhoj Research, as on 11^th March 2025

Canara Robeco Focused Fund Vs Category performance

Rolling returns is one of the most unbiased measures of mutual fund performance. Point to point returns is biased by market conditions during the period, but rolling returns include performances in different market conditions. The chart below shows the 3 year rolling returns of Canara Robeco Focused Equity Fund versus the focused fund category average, since the inception of Canara Robeco Focused Equity Fund. You can see that fund not only outperformed the peers (on average) in terms of higher average returns (17.01% versus 14.60%), the number of instances that the fund gave returns >15%, was significantly higher than the category average (80.09 times vs 50 times)

Mutual Fund - Rolling returns is one of the most unbiased measures of mutual fund performance

Source: Advisorkhoj Research, as on 28^th February 2025

Lower Volatility compared to peers

We looked at the standard deviation (a measure of volatility) of all focused funds which have completed 3 years (see the chart below). Canara Robeco Focused Equity Fund (marked in orange) seems to have lower volatility compared to most of its peers.

Mutual Fund - We looked at the standard deviation of all focused funds which have completed 3 years

Source: Advisorkhoj Research, as on 28^th February 2025

Lower systematic risk compared to peers

Beta is a measure of systematic risk of a fund. We looked at the beta of focused funds which completed minimum 3 years (see the chart below). Canara Robeco Focused Equity Fund (marked in orange) seems to have lower beta compared to most of its peers.

Mutual Fund - We looked at the beta of focused funds which completed minimum 3 years

Source: Advisorkhoj Research, as on 28^th February 2025

Superior risk adjusted returns compared to peers

Sharpe ratio is a measure of risk adjusted returns of a fund. We compared the Sharpe Ratio of focused funds which completed minimum 3 years (see the chart below). Canara Robeco Focused Equity Fund (marked in orange has delivered a higher Sharpe Ratio relative to most of its peers. Historical data shows that a fund which is able to limit downside risks (lower volatility) and at the same time, produces superior risk adjusted returns, has the potential to generate higher returns in the long term (across multiple investment cycles).

Mutual Fund - We compared the Sharpe Ratio of focused funds which completed minimum 3 years

Source: Advisorkhoj Research, as on 28^th February 2025

Superior risk adjusted returns compared to peers

Market capture ratio is a measure of the performance of a mutual fund scheme relative to its benchmark index in rising and falling markets. Up Market Capture Ratio tells us how much percentage of the market's upside was captured by the fund, while Down Market Capture Ratio tells us how much percentage of the market's downside was arrested by the fund. Up Market Capture Ratio and Down-Market Capture ratio can give us a sense of risk adjusted returns. We looked at the market capture ratios of Canara Robeco Focused Equity Fund over the past 1 year.

The Up Market Capture Ratio of Canara Robeco Focused Equity Fund over the last 1 year was 116% which implies that if the benchmark index went up by 1% in a month, then the scheme's Net Asset Value (NAV) went up by 1.16%. The Down-Market Capture Ratio of the fund was 92% which implies that if the benchmark index went down by 1% in a month, then the scheme's Net Asset Value (NAV) went down by 0.92%. The market capture ratios of Canara Robeco Focused Equity Fund are a clear indication of the potential of the fund to give superior risk adjusted returns.

Wealth creation through SIP

The chart below shows the growth of Rs 10,000 monthly SIP in the Canara Robeco Focused Equity Fund since the inception of the fund. With a cumulative investment of Rs 4.6 lakhs you could have accumulated a corpus of Rs 5.77 lakhs (as on 28^th February 2025) in the last 4 years or so. Remember, that we are going through one of the longest corrections that has hit the Indian markets since 2008. In spite of the markets sliding, the fund delivered a 13.1% XIRR as on 28th Feb 2025.

Mutual Fund - The chart below shows the growth of Rs 10,000 monthly SIP in the Canara Robeco Focused Equity Fund since the inception of the fund