Axis Bluechip Fund Review: A Consistent Performer

Axis Bluechip Fund is one of the top-rated funds by various MF rating agencies. Continue reading to know the performance of the fund.

Axis Bluechip Fund is an open-ended scheme of 33 stocks that is benchmarked against the Nifty 50 Total Returns Index (TRI). In this post, we would be looking at the fund from a 360-degree angle that will help an investor make a better investment decision.  

How does the fund perform?  

In order to understand the fund’s performance, we have compared its three-year rolling returns against its benchmark and category average. The period of study ranges from December 2011 to November 2021. 

The above two graphs give an idea about the performance of Axis Bluechip Fund as against the large-cap category and Nifty 50 TRI (fund’s benchmark). As we can see, Axis Bluechip Fund has consistently outperformed its benchmark and category average. Although there was a long rough patch of around five years that is from March 2013 to February 2018 where the fund has underperformed the category average. However, thereafter the fund gained momentum and has not underperformed in the single three-year rolling returns instance.  

Let us now look at the performance of the fund as against its category and benchmark based on median, minimum and maximum returns of three-year rolling returns. The results are quite encouraging as the fund scored over its category average and benchmark. In fact, the fund has never generated negative returns in any three years period in the past 10 years.  

Note: The data used to calculate the performance of the fund and category is of the regular plan.  

How risky is the fund?  

To understand the risk undertaken by the fund against its category and benchmark, we have taken the maximum drawdown as the primary parameter. However, we have also compared its standard deviation, downside deviation, Sharpe ratio and Sortino ratio. 

As we can see that in the above two graphs shows the risk metrics of the fund alongside its category and benchmark. In terms of maximum drawdown, Axis Bluechip Fund has the lowest maximum drawdown when compared with category and benchmark. It only underperformed 32 per cent and 26 per cent of the times as against its benchmark and category, respectively.  

Moreover, its standard deviation and downside deviation is also less than its category and benchmark suggesting that the fund is better at containing the downside risk. Even in terms of risk-adjusted returns as measured by Sharpe and Sortino ratios, the fund scores over category average and benchmark.   

What is the asset allocation and investment strategy of the fund?  

Being an equity fund, it has 95.7 per cent of the assets allocated towards equity and 4.3 per cent towards debt and cash. 

The fund is a large-cap fund having 98.92 per cent of total equity allocation towards large-cap stocks and as little as 1.08 per cent to mid-cap stocks. The scheme is proposed to invest in large-cap companies with strong growth and sustainable business models, whilst managing risk.  

The fund uses a bottom-up approach for stock selection, focusing on the appreciation potential of individual stocks from a fundamental perspective. To analyse the potential of each stock in its universe, it employs a ‘fair value’ based research process. Fair value is nothing but measuring the intrinsic value of the company. Moreover, the stocks are carefully selected to include companies having robust business models and enjoying sustainable competitive advantages as compared to their competitors.  

In order to manage the risk, Axis Mutual Fund has identified the following risk and embedded appropriate risk management strategies in its investment process:  

i) Quality risk – Risk of investing in unsustainable/weak companies  

ii) Price risk – Risk of overpaying for a company  

iii) Liquidity risk – High impact cost of entry and exit  

iv) Volatility risk – Volatility in price due to company or portfolio specific factors  

v) Event risk – Price risk due to a company/sector-specific or market event  

How does this fund fair on the concentration front?  

As of November 2021, the fund comprises 33 stocks giving higher weightage to stocks like Bajaj Finance, Infosys, ICICI Bank, HDFC Bank, etc. 

If we look at the fund on the concentration front, then indeed it is quite concentrated and is prone to concentration risk. The top 10 holdings form almost 65.6 per cent of the overall portfolio, with 9.1 per cent being the highest weightage given to the stock. On the sectoral front, the top three sectors form 66 per cent of the portfolio. Therefore, indeed the fund is prone to concentration risk.  

How is the fund manager?  

Shreyash Devalkar is managing this fund since November 2016. He has over 17 years of work experience. At present, he is managing two more funds for Axis Mutual Fund; Axis Mid-Cap Fund and Axis Flexi-Cap Fund. In the past three to four years, the performance of the fund has improved drastically and this can be very well attributed to Shreyash Devalkar’s fund management skills. The returns generated by the fund manager across his tenure and funds is 20.89 per cent, whereas the index has given 17.2 per cent. This indeed shows that the fund manager is of high calibre.