Axis Bluechip, a large-cap fund has beaten its benchmark, the Nifty 50 by a wide margin in the past year. It has delivered 20.72% compared to 14% on the index and has done so in a particularly challenging year for large-cap funds. The fund takes highly concentrated bets on a small number of stocks. This can work both ways. A slip in any of them can cause a dramatic loss of value. While outperformance of one or two stocks can take the net asset value (NAV) higher.
The scheme has been officially classified as a large cap fund. This means that it must invest 80-100% of its assets in the top 100 listed companies by market capitalisation. The balance 20% can go into other types of companies or debt. Shreyas Devalkar has been the manager of the fund since November 2016. He was previously a fund manager at BNP Paribas Mutual Fund.
Axis Bluechip (formerly Axis Equity Fund) was launched in 2010. It has beaten its index over the past one, three and five years. The outperformance has been particularly strong in the past year and stands in contrast to most other large-cap funds which have given returns less than the index. For instance, HDFC Top 100 (formerly HDFC Top 200) has delivered just 6.95%. SBI Bluechip has given 9.17% and ICICI Prudential Bluechip has delivered has delivered 12.37%.
|Fund/Index||1 year||3 years||5 years||Since Launch|
Source: Value Research, As on 15/06/2018
A big reason for the outperformance seems to be the fund’s highly concentrated portfolio. The fund owns just 31 stocks. However, the top 10 stocks account for more than half of the portfolio (55.6%). The top three holdings are HDFC Bank (10.3%), Kotak Mahindra Bank (8.6%) and HDFC (5.99%). The financial and automobile sectors together account for 52% of the fund’s portfolio. This may have generated the fund’s strong returns in the past year but comes at a high risk. A fall in HDFC Bank or the banking sector as a whole will cause a huge fall in the fund’s value.
Large-cap funds can outperform for various reasons. A concentrated approach is not necessarily a bad strategy. However, investors should be conscious of the risks involved.