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Best Midcap Mutual Fund in the last 6 years: Mirae Asset Emerging Bluechip Fund

Mutual Funds

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Mutual Funds article in Advisorkhoj - Best Midcap Mutual Fund in the last 6 years: Mirae Asset Emerging Bluechip Fund
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Mirae Asset Emerging Bluechip Fund will celebrate its 6th anniversary on July 9. In the last 6 years, this mutual fund scheme has emerged as the best performer in the small and midcap segment (please see top performing small and midcap funds in the last 6 years in Top Performing Mutual Funds - Lumpsum Investments in our MF Research section). If you had invested 1 lakh lump sum in the NFO of Mirae Asset Emerging Bluechip Fund (Growth Option) 6 years back, your money would have more than tripled to over 3.25 lakhs at a CAGR of 22%. This is indeed outstanding performance, because it was not all smooth sailing for the equity market in the last 6 years.

The SIP performance of Mirae Asset Emerging Bluechip Fund is also quite extraordinary. With a monthly SIP of 5,000 in Mirae Asset Emerging Bluechip Fund (Growth Option) from its inception, you would have accumulated nearly 8.15 lakhs by July 7th 2016, an annualized return (XIRR) of over 27% (please the SIP calculator of Mirae Asset Emerging Bluechip Fund). This fund was a part of our selection of Top 7 Best Mid and Small Cap Equity Mutual Funds to Invest in 2016

Fund Overview

The fund was launched in July 9, 2010. It has around 1623 crores of Assets under Management. The expense ratio of the fund is 2.4%. Neelesh Surana, CIO – Equity of Mirae Assets Global Investments (India) is the fund manager of this scheme. CRISIL has ranked this scheme 1 in the midcap category, while Morningstar has a 5 star rating for this fund. The chart below shows the trailing annualized returns of the fund, category and benchmark (as on July 7, 2016) over various time-scales.


Mutual Funds - The trailing annualized returns of the fund, category and benchmark (as on July 7, 2016) over various time-scales

Source: Advisorkhoj Research


You can see that the fund outperformed its category and benchmark across different time-scales. The chart below shows the annual returns of the Mirae Asset Emerging Bluechip Fund, category and benchmark over the last 5 years.


Mutual Funds - The annual returns of the Mirae Asset Emerging Bluechip Fund, category and benchmark over the last 5 years

Source: Advisorkhoj Research


You can see that the fund has outperformed the category and benchmark every year over the last 5 years. The chart below shows the NAV movement of Mirae Asset Emerging Bluechip Fund since inception.


Mutual Funds - The NAV movement of Mirae Asset Emerging Bluechip Fund since inception

Source: Advisorkhoj Research


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. For midcap funds in fact, investors should have a longer investment horizon than large cap or diversified equity funds.


Mutual Funds - The 3 year rolling returns of Mirae Asset Emerging Bluechip Fund over the last 5 years

Source: Advisorkhoj Rolling Returns Calculator


You can see that, over the last 5 years, the fund has not only consistently beaten the benchmark, but has always delivered more than 20% annualized rolling returns, over a three year investment horizon at any point of time in the last 5 years. In fact, the fund has delivered more than 30% rolling returns more than 80% of the times in the last 5 years. The strong rolling returns shows that, this relatively young fund has been a wealth creator for investors. We would also like to draw our reader’s attention to relatively stable performance gap between the fund and benchmark, which shows prudent and disciplined portfolio management approach.

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. He 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. In terms of sector allocation, the current portfolio has bias for cyclical sectors like banking and finance, automobile ancillaries, chemicals, capital goods etc. However, the fund also has substantial allocations to defensive sectors like pharmaceuticals, FMCG and information technology. In terms of company concentration, the portfolio of Mirae Asset Emerging Bluechip Fund is very well diversified with its top 5 holdings, Kotak Mahindra Bank, Indusind Bank, HPCL, Exide Industries and Torrent Pharmaceuticals accounting for only 18% of the total portfolio value. Even the top 10 stock holdings account for only 30% of the total portfolio value.


Mutual Funds - Sector Composition and Top 5 Holdings of Mirae Asset Emerging Bluechip Fund

Source: Advisorkhoj Research


Risk and Return

In terms of NAV volatility, as measured by the annualized standard deviation of monthly returns, the volatility of Mirae Asset Emerging Bluechip Fund at 16.5% is lower than the average volatilities of midcap funds (17.6%). Even though the volatility of the fund is below average, the Sharpe Ratio is excellent (for more scheme performance and other details, please see our fund research page).

The chart below shows the growth of 1 lakh lump sum in Mirae Asset Emerging Bluechip Fund (Growth Option) over the last 5 years (period ending July 6, 2016).


Mutual Funds - The growth of Rs. 1 lakh lump sum in Mirae Asset Emerging Bluechip Fund (Growth Option) over the last 5 years

Source: Advisorkhoj Research


You can see that your investment would have nearly tripled 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 5,000 monthly SIP in Mirae Asset Emerging Bluechip Fund (Growth Option) over the last 5 years (period ending July 6, 2016).


Mutual Funds - The return of Rs. 5,000 monthly SIP in Mirae Asset Emerging Bluechip Fund (Growth Option) over the last 5 years

Source: Advisorkhoj Research


You can see that, with a monthly SIP of 5,000 in Mirae Asset Emerging Bluechip Fund, you could have accumulated a corpus of nearly 6.3 lakhs by now (July 6, 2016). In other words, on a cumulative investment of 3 lakhs, you would have made a profit of nearly 3.3 lakhs.

Conclusion

Mirae Asset Emerging Bluechip Fund has been an outstanding performer in the last 6 years. Investors should have a long investment horizon when investing in this midcap fund. Mirae Asset Emerging Bluechip Fund will complete 6 years on July 9, 2016. Advisorkhoj wishes the fund a very happy birthday and we hope that the fund continues its strong performance in the future. Investors should consult with their financial advisors, if Mirae Asset Emerging Bluechip Fund is suitable for their investment portfolios.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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Dwaipayan Bose

An alumnus of IIM Ahmedabad, Dwaipayan is a Finance and Consulting professional, with 13 years of management experience, mostly in MNCs like American Express and Ameriprise Financial, both in India and the US. In his last role, he was the Chief Financial Officer of American Express Global Business Services in India. His key interests are building best in class organizations, corporate governance and talent development

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