Category Change for Mirae Asset Equity India Fund

April 2019

3 min read

 

This doesn’t happen often, not with one of the largest; most successful funds anyway.

 

What’s the change?

Mirae Asset Equity India Fund is one of the largest multi-cap funds in the Indian Mutual Fund industry with AUM of approximately 11,000 Crores. It announced a change in categorization from Multi-Cap to Large Cap w.e.f 1st May 2019.
This change is despite the fact that it is one of the most consistent performing funds since its launch in April 2008.

 

Background

As the fund established consistency in performance, it became the investor’s top choice for investment. Many investors invested in this fund because of its multi-cap mandate and ability to invest across market capitalization.
With a change of category to Large-cap, what should investors do? Will the fund be able to continue the over performance as compared to category and benchmark? Is the fund now suitable for your long term goals?

We will answer many such questions in this blog.

Let’s look at some fund metrics first.

As of March 2019, Mirae Asset India Equity was managing assets worth 11,000 crores. It has seen phenomenal growth in the last 3 year’s data. Here’s a chart,

This increase in AUM is proof of the fund’s consistent performance. Next we looked at annual performance for the last 10 years to check over performance with respect to the benchmark. And here’s what we found:

 

Historical returns as compared to the benchmark of S&P BSE 200 TRI (TRI is Total Return Index which means that the index returns also have dividends included in them)

Apart from historical returns, we also looked at point to point returns for the last 10 years:

Every year consistently without exception, the fund has managed to outperform the benchmark.

Is this because the fund was Multi-cap with exposure to large, mid and small cap stocks? the return was higher because of appreciation of mid and small cap stocks?

To answer this, we again looked at the large-cap exposure of the fund for the last 3 years. And here’s the data simplified for you:

Since January 2016, Mirae Asset India Equity Fund has had more than 60% of it’s in the portfolio in Large Caps.

And hence the performance of the fund is mostly driven by large-cap stocks in the portfolio. These are just some of the quantitative aspects of the fund’s past performance and portfolio.

We have analyzed the qualitative aspects of the fund too. You can read about it in our previous blog post on the investment style of top fund managers.

 

So what should be the plan ahead?

As we always say that Equity is a long term product, even though the Mirae Asset India Equity changes its category from Multi cap to Large Cap, it is still suitable for your long term goals. With a multi-cap mandate, the fund chose to invest predominantly in large cap stocks and managed to over perform the benchmark with a wide margin. The fund management team has the expertise and capabilities to create alpha with large cap stocks.
Hence for the long term, there is no need to take any action on this fund. You may keep the fund under observation and keep track of performance. Looking at the track record of Mirae Asset India Equity Fund and also of the AMC, this change is well thought out should not be a cause of concern.

So, now your portfolio will have space for multi cap funds, diversify your portfolio with the addition of multicaps.