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L&T Emerging Businesses: Ace Mid & Small Cap Fund
Wed, Mar 15, 2017
Source : Yash Jashnani, Citrus Interactive

L&T Emerging Business Fund is an open ended equity diversified fund. The scheme will predominantly invest in mid and small cap stocks. The fund has an AUM of Rs 574 Crore as on February 2017 which has increased by Rs 269 crore compared to last year February 2016.


Performance

 

The fund’s performance across various time horizons is exceptionally good as seen in the table given below. It has beaten its benchmark and equity diversified category average in all time periods. It has ranked number one in both 6 months and one year periods. Even in the year-to-date period it is among the best performing.

 

Scheme Name

YTD

6 Months

1 Year

Since Inception

L&T Emerging Business  Fund

15.51

14.51

57.74

27.99

 S&P BSE SMALL-CAP

13.65

9.64

43.28

23.18

Category Average

10.28

5.08

34.97

NA

Rank

4/148

1/148

1/148

NA

Figures are in % as on 28th February 2017; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

*The scheme was launched on 12th May 2014, hence the 3 year and 5 year period data is not available.

 

In terms of the calendar year returns the fund has beaten its benchmark as well as category average in both 2015 and 2016.

 

Scheme Name

2015

2016

L&T Emerging Business

12.32

10.21

 S&P BSE SMALL-CAP

6.76

1.77

Category Average

3.88

4.75

Rank

15/141

20/148

All figures in %

 

Risk: In terms of measures of risk such as standard deviation (measured over the last 3 years) the fund has taken higher risk compared to the category median and in terms of Beta (measured over the last 3 years), the fund has taken lower risk compared to the category median.

 

 

Standard Deviation

Beta

L&T Emerging Business

1.08

0.88

Category Median

0.94

0.92

 

 

Risk-Adjusted Return: In terms of Treynor and Sharpe ratio (measured over the last 3 years), the fund has proved higher risk-adjusted returns than the category median.

 

 

Treynor

Sharpe

L&T Emerging Business

0.1

0.09

Category Median

0.06

0.06

 

 

Portfolio


Sector concentration: The fund’s concentration in the top 3, 5 and 10 sectors is lower than the category median.

 

 

Top 3

Top 5

Top 10

L&T Emerging Business

16.83

26.32

45.29

Category Median

33.43

45.25

64.52

 

 

Company concentration: The Fund’s Concentration in the top 3, 5 and 10 companies is lower than the category median.

 

 

Top 3

Top 5

Top 10

L&T Emerging Business

7.8

12.44

22.5

Category Median

16.15

24.34

40.31

 

 

Sector and Company Concentration signifies that the funds maintain a fairly diversified portfolio.

 

Number of Equity Holdings: The Fund currently holds 67 stocks in its portfolio (31st January 2017), which is higher than the median stock count of the equity diversified category, which currently stands at 46.

 

Cash Equivalent:        

 

Its cash equivalent for January 2017 is 7.87 per cent. The average cash allocation for the last five years is 5.66 per cent. Its maximum allocation to cash over the last two years is 4.98 percent in March 2015 and lowest was 1.04 percent in June 2016.

 

Portfolio Characteristics:

 

The top 5 sectors include Chemicals, Bank – Public, Cement & Construction Materials, Plastic Products and Engineering – Constructions.

 

In the last 6 months the fund has bought Avanti Feeds Ltd., Ballarpur Industries Ltd., Bayer CropScience Ltd., Coromandel International Ltd., Dalmia Bharat Ltd., Deccan Cements Ltd., Dishman Pharmaceuticals & Chemicals Ltd., Dwarikesh Sugar Industries Ltd., Engineers India Ltd., Future Lifestyle Fashions Ltd., GNA Axles Ltd., IDFC Ltd., IFGL Refractories Ltd., Maharashtra Seamless Ltd., National Aluminium Company Ltd., Orient Paper & Industries Ltd., Rico Auto Industries Ltd., Sheela Foam Ltd., Skipper Ltd., Sterlite Technologies Ltd., Sudarshan Chemical Industries  Ltd., Supreme Petrochem Ltd., Swaraj Engines Ltd., Welspun India Ltd.  and Wim Plast Ltd.

 

Stocks of Advanced Enzyme Technologies Ltd., Ashoka Buildcon Ltd., Blue Star Ltd., Cholamandalam Investment & Finance Company Ltd., Godfrey Phillips India Ltd., Greenply Industries Ltd., KEC International Ltd., Monsanto India Ltd., Navkar Corporation Ltd., Orient Cement Ltd. Repco Home Finance Ltd., Sanofi India Ltd., Somany Ceramics Ltd., TD Power Systems Ltd., Vardhman Textiles Ltd. and Voltas Ltd. The stock of Trent Ltd. has been bought and sold in the last 6 months.

 

Process

 

The investment objective of the Scheme is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity related securities, including equity derivatives, in the Indian markets with key theme focus being emerging companies (small cap stocks). The Scheme could also additionally invest in Foreign Securities. Emerging companies are businesses which are typically in the early stage of development and have the potential to grow their revenues and profits at a higher rate as compared to broader market.

 

In the equity portion, the fund would invest 50 – 100% of its assets into small cap companies (defined as stocks beyond top 200 stocks in terms of market capitalization) and 0 – 35% would be invested in equity related securities including investments in equity derivatives (equity derivatives limited to 25% of the net assets of the scheme). The scheme may also invest in Foreign Securities upto 10% of the net assets of the scheme.

The fund would invest 0 – 35% in debt and money market instruments.

 

The investment approach is bottom-up stock picking. A limited exposure to various equity derivatives instruments is likely - for the purposes of hedging, portfolio balancing and optimizing returns.

 

They will favour companies that offer the best value relative to their respective long-term growth prospects, returns on capital and management quality. When assessing a company, the fund managers will focus on understanding how each of these factors will change over time.

 

Fund Manager

 

Soumendra Nath Lahiri

 

Mr. Soumendra Nath Lahiri has been the Head of Equities at L&T Investment Management Limited since September 2012 and also serves as its Fund Manager. He serves as Head of Equities and Fund Manager of various L&T Mutual Funds.

 

Soumendra has an experience of over 17 years in equity markets in India. Prior to joining L&T Investment Management, he was Head of Equities at Canara Robeco Mutual Fund. His previous assignments include Chief Investment Officer at Emkay Global Services and Fortuna Capital and Co-Head - Equities with DSP Merrill Lynch Investment Managers Private Limited.

The other schemes managed by Mr. Lahiri are L&T Midcap Fund, L&T Equity Fund, L&T India Special Situations Fund, L&T Infrastructure Fund & L&T Infrastructure Fund.

 

He holds a P.G.D.M. in Finance and Marketing from IIM Bangalore. Mr. Lahiri also holds a B.E. degree in Mechanical Engineering.

           

Our View

 

L&T Emerging Businesses has demonstrated an extraordinary performance in its short performance history. The fund has benefited from the stock picking skills of the fund manager. The fund has a small size which makes it favourable in the mid and small cap fund space. By its nature funds in this category are aggressive in nature and can be volatile. We recommend this for the mid and small cap allocation in your portfolio.

 

 
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