Canara Robeco Infrastructure Fund

With the infrastructure industry placed in a progressive situation, this fund has thematically been doing well with a major portion of its money parked in large-cap stocks.

At a time when lots of black clouds (debt concerns) are surrounding Europe, things in India seems to be quite better placed. Even the World Bank in its recent report has reinstated this fact and said that Indis recovery was faster than projected and it is expected that the economy (GDP) will grow by over 8-9 per cent over the next two years. Further, with inflation showing signs of taming and the rainfall expected to be normal, worries over mounting fiscal deficit have been put to rest by the recent spectrum sale, the government’s divestment plans, fresh capacity additions across industries, low interest rates, industrial recovery and investment activity gaining momentum. All this certainly bodes well for the India growth story

With favourable demographics driving it, this growth is achievable despite all the global woes, though investing in and building infrastructure will play a larger role in sustaining it over the long run. The Indian government understands it well and has allocated Rs 17 trillion, or 46 per cent of the total plan allocation for infrastructure development in the country in its 201O-1 1 budget. Also, the recent announcement of a special fund for this sector will provide a booster to the infrastructure sector. It will also help in the overall development as it will create jobs, generate income and increase demand as also improve lifestyle, etc. The major beneficiary in the first leg of this investment will be the infrastructure industry.
Taking all this into consideration, we have adopted a top-down approach in our fund selection process and have chosen an infra theme fund from Canara Robeco AMC. This recommendation comes at a time when all the infrastructure funds have underperformed their diversified peers over the last one year period. This may be sounding contradictory, though one can see this as a contrarian call and high investors with patience can take limited exposure to this scheme. The question that obviously comes to the mind is this: Why only this scheme? To begin with, it has managed to give the best risk-adjusted returns (Sharpe Ratio of 0.37) in this category.

Second, it has been a consistent performer except for FY08 which was a difficult year for all the fund managers. That was when it underperfortned the diversified funds, though marginally. During the last one year period, the fund has outperformed all other infra funds, showing the astuteness of the fund manager who was fast in deploying cash which worked well in the fund’s favour. Anand Shah, who manages this fund, has a good track record. He has not only done well with this fund but his other funds have also managed to beat the category by fair margins over the longer run.

As for its portfolio, in May this fund had a fairly compact portfolio of 39 stocks primarily invested in energy stocks (31 per cent of the net asset) while the top ten holdings contributed close to 40 per cent of the total assets. It invested nearly 65 per cent of its assets in large-cap stocks that provides it with stability. Thus, this fund stands out in managing its risk well by tactically allocating its corpus across market—cap and right stocks.

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