Axis Bluechip Fund was once the go to large cap fund for
most investors in the large cap space.
This was not confined to only those wanting to invest in a
large cap fund but also those who did not, they were motivated by returns.
2018 to mid 2020 was the same case for most axis mutual fund
schemes & not just Axis Bluechip Fund.
So what exactly has gone wrong & what is ailing Axis
Bluechip Fund.
What is Axis Bluechip
Fund?
Axis Bluechip Fund is a large cap fund & thereby invests
majorly in large cap stocks.
A large cap fund by regulation needs to invest a minimum of
80% in the top 100 listed companies i.e. large cap stocks.
The fund manager has complete freedom to invest as per her
wish with regards to the remaining 20%.
The new regulations were set in place in 2018 by SEBI’s
re-organization of schemes.
What went wrong with
Axis Bluechip Fund?
Axis bluechip fund has been on a downward spiral for quite
some time now.
What is interesting to note here is, this is case with most
other equity schemes from the axis mutual fund house.
So what is ailing it?
Returns & Performances are subjective & relative,
often when the markets are looking up, investors rarely take the initiative to
study the reasons for the rise.
When the markets are on a downfall, all of a sudden there
are various studies and often also theories to unravel the mystery of this
downfall.
Understanding why a fund is doing well is as important as
understanding why it is not, often the ladder that helps us scale new heights
is also the same reason for our downfall.
Cash Holdings
During 2018 & 2019, Axis Bluechip fund along with most
equity schemes of axis mutual fund had high cash holdings.
Even the number of holdings were limited.
One possible explanation for this is because the market provided
fewer attractive opportunities for growth.
Therefore the fund preferred to hold on to a limited number
of growth companies with the rest held in cash.
The fund could afford to sit on the same set of companies
across various quarters with the rest of the aum held in cash since the market
at the time had limited number of companies that were in reality driving the
market.
This is not the case with the market scenario anymore and
therefore the approach of setting aside a certain portion of aum in cash will
less likely yield any significant result.
|
Cash Holdings in Axis Bluechip
Fund |
|||
|
December 2018 |
18.35% |
December 2021 |
5.87% |
|
January 2019 |
19.02% |
January 2022 |
5.63% |
|
February 2019 |
17.91% |
February 2022 |
6.93% |
|
March 2019 |
10.94% |
March 2022 |
6.17% |
The difference between the two corresponding years for the
same month shows a reduction of more than 10% in cash holdings as opposed to what
was the case earlier.
Additional reading: Click Here to read about how Compounding works in mutual funds.
Strategy
Axis Bluechip fund has traditionally applied a focused
approach to its portfolio even though it is not a focused fund.
Earlier the fund had limited its holdings to 20-25 stocks
with the rest held in cash.
These 20-25 stocks during the fund’s high phase were growth
companies with healthy earnings.
Now the market has moved on and there are more than these
20-25 stocks dispersed across various sectors that have been posting healthy
results.
This has meant the focused approach does not have an
environment anymore conducive for its functioning.
This does not imply that the focused approach despite the
category is irrelevant now but rather a focused approach using the same set of
holdings is no longer working.
The market has changed drastically in various ways since the
crash of 2020 and therefore an active approach is the need of the hour.
It was not about the ever increasing aum that has also affected the
strategy but also about the increase of aum in such a short time.
|
Period |
AUM |
Difference |
|
December 2018 |
3,737 |
|
|
January 2019 |
3,961 |
+224 |
|
February 2019 |
4,220 |
+259 |
|
March 2019 |
4,802 |
+582 |
|
April 2019 |
5,143 |
+341 |
Growth versus Value
Axis mutual fund as a whole has mostly been driven by the
growth strategy.
Axis bluechip has been no exception.
As previously mentioned, the fund was usually made up of a
limited number of growth stocks that yielded healthy results.
The fund would play it safe by betting on the traditional
powerhouses in their respective fields, as mentioned previously the markets
were being driven by a limited number of stocks.
The fund was overweight on traditional sectors like Banking
with what can be termed as defensive stocks.
After the crash of 2020 though, the market has seen a rally
that has resulted in previously unmoved sectors & companies also
participating and taking an upward turn.
Sectors like IT & Pharmaceuticals which were previously
in a limbo got a breath of fresh air, in a market rally all sorts of sectors and
companies make fresh gains.
This meant the markets were no more driven by a few sectors
and companies and there were a lot more opportunities available now.
Value funds & funds with a value approach that were
dormant for some years now all of a sudden found a spring in their step.
Other large cap schemes were now therefore benefitting from
this rally and expanded further their investment horizons whereas Axis Bluechip
fund failed to accommodate the changes.
Phase
Every mutual fund scheme and mutual fund house as a whole
will go through various phases, ups and downs.
It is not possible for one to be at the top constantly.
One of the many reasons for this is because India’s a
developing economy and thereby volatile.
As an economy it undergoes various economic policy changes,
its stock market is more volatile than those of developed economies.
This volatility though is what also provides its investors
with opportunities to make money, precisely why FII’s chose India along with
other developing economies to hold their money.
Due to all the reasons mentioned, one needs to adopt an
active approach while investing & not fall into the trap of sitting on proven
winner so to speak.
Where axis bluechip fund went wrong was in sticking to its
investing style even when the market movements were not conducive to it.
This by no means should be inferred as an encouragement to momentum
investing or trading but rather is a reminder that adaptability still remains
the first step towards surviving, thriving remains the next.
With a rising AUM and a category where options are limited, its ability to beat the benchmark gets even more restricted. It no more serves the need of a long term investor with long term goals.
This is not to say the fund will continue to lag but one does wonder its viability & long term sustainability to find its place in a mutual fund portfolio for the long term.
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