Fund Review: Canara Robeco Small Cap Fund

Canara Robeco Small Cap Fund is an open-ended equity scheme predominantly investing in small-cap stocks. The fund was launched on February 15, 2019, and has since delivered impressive returns to its investors. As of November 30, 2023, the fund has an NAV of Rs 30.87 and has provided an average annual return of 26.53% since its inception. The Asset under management for this fund currently stood at Rs 7,813 and the expense ratio for the regular plan is 1.73%, whereas it is 0.41% for the direct plan.

The fund’s investment objective is to generate long-term capital appreciation by investing primarily in a diversified portfolio of small-cap companies. The fund follows a growth investment strategy and invests in companies with high growth potential. The fund’s portfolio is well-diversified across sectors and industries, which helps to mitigate risk.

Fund Managers

Shridatta Bhandwaldar is an experienced investment professional with over 18 years of industry experience. He has been managing the strategy for the past four years. Recently, there was a change in the fund manager, where Pranav Gokhale replaced Ajay Khandelwal. Pranav Gokhale has 20 years of industry experience.

Fund Performance

Canara Robeco Small Cap Fund – Direct Plan has underperformed its benchmark, the S&P BSE 250 SmallCap TRI, on a YTD, 1M, 3M, 6M and 1Y basis. However, it has outperformed the benchmark and category on a 3Y basis.

This suggests that the fund has lagged behind the broader small-cap market in the short term, but has outperformed over the longer term. Overall, the fund’s performance is satisfactory. It has outperformed its benchmark over the longer term, which suggests that the fund manager is able to generate alpha.

Investors who are comfortable with volatility and have a long-term investment horizon may consider investing in the Canara Robeco Small Cap Fund. However, investors should monitor the fund’s performance closely and be prepared to exit if it underperforms its benchmark for an extended period of time.

Peer Comparison

The Canara Robeco Small Cap Fund has a lower net asset value and a shorter fund age than its peers. It also has a higher turnover ratio, which means that it trades its portfolio more frequently. The Fund is a good performer among its peers. It has a good track record over the long term, and an experienced fund manager manages it.

Asset Allocation

The Fund has its 93.64% holding in equity portion and the remaining 6.36% is in cash. The equity portion holds 10.80% in giant companies where the category average is 6.24%, holding of 6.49% in large-cap companies where the category average is 3.14%, holding of 54.44% in mid-cap companies where the category average is 62.09%, holding 28.27% in small-cap companies where the category is average is 32.95%. It looks like the fund is following a medium growth style to generate alpha.

Risk and Measures

The fund has a positive alpha of 4.31%, which means that it has outperformed its benchmark by 4.31% in the 3-year range. The fund has a beta of 0.83, which means that it is slightly less volatile than the market. The fund’s R² of 88.83% means that its benchmark can explain 88.83% of its return variation. This suggests that the fund is closely tracking its benchmark.

The fund has a Sharpe Ratio of 1.74, which is higher than the benchmark’s Sharpe Ratio of 1.67. This suggests that the fund generates more excess return per unit of risk than the benchmark. The fund’s standard deviation of 15.73% is slightly lower than the benchmark’s standard deviation of 16.18%. This suggests that the fund is slightly less volatile than the market.

The risk and volatility measures of the Canara Robeco Small Cap Fund suggest that it is a well-managed fund that is outperforming its benchmark. It has a slightly lower beta and standard deviation than the market, and it generates more excess return per unit of risk than the benchmark.

Strengths and Weaknesses

The Canara Robeco Small Cap Fund has both strengths and weaknesses. On the one hand, the fund has two portfolio managers, a diversified portfolio with 88 holdings, and trades less frequently than the category’s average, which could limit costs to investors. However, on the other hand, the fund has more exposure to the Growth factor than the Small-Cap Category average, had low exposure to momentum stocks in the past few years, and is overweight in financial services and healthcare.

This sector allocation is not in line with the broader small-cap market, and it could lead to underperformance if the financial services and healthcare sectors continue to underperform.

The Canara Robeco Small Cap Fund is a mixed bag. Investors should carefully consider the fund’s strengths and weaknesses before investing.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.