In recent years, active large-cap funds have been under the strict scrutiny of investors as most of them have failed to outperform their respective benchmarks. However, the Axis Bluechip fund is an outlier.
It has consistently beaten its benchmark in the past 8 out of 10 calendar years. Only recently, that is, in 2021 and 2022, the fund has underperformed its peers and benchmark. Nevertheless, its long-term track record remains unscathed.
In this blog, we will look at the long-term performance and investment strategy of Axis Bluechip Fund. We will also address the question on many investors’ minds–does Axis Bluechip remain a good long-term pick for the future despite its recent underperformance?
Let’s first look at the fund’s performance.
Axis Bluechip Fund Returns vs Benchmark
Axis Bluechip has outperformed the large-cap benchmark S&P BSE 100 TRI over the long term. When one compares the 5-year rolling return of the fund with the benchmark, it has delivered higher returns on 99% of the occasions. This explains the consistency of the fund.
Moreover, the fund has delivered over 10% return for a 5-year period on 89% of the occasions. This means if you had invested in Axis Bluechip on any day for a 5-year period, there are high chances that you would have earned over 10% returns.
Axis Bluechip Fund Returns vs Large-Cap Category
Over the past 10 years, Axis Bluechip has been the third-best performing fund among its peers and has delivered a CAGR of over 15%. The average returns of all funds are around 13% for the same period.
If we compare year-on-year performance with its category, the fund has delivered outperformance in most of the years.
Downside Protection In Axis Bluechip Fund
In March 2020, when large-cap funds corrected around 26% on average, Axis Bluechip was able to limit its fall to 18%. And this was not a one-off occurrence.
Axis Bluechip fund has been able to curtail downfall better than its peers in the large-cap category. In quarters where large-cap funds have delivered negative returns, Axis Bluechip has fallen less than its peers. Since this fund’s inception, there were 19 quarters when the large-cap category average gave negative returns. But this large-cap fund from Axis Mutual Fund only witnessed negative returns in 8 quarters.
But what are the reasons for this consistency in the fund’s performance? To get an answer, let’s look at the investing strategy of the fund.
Investment Strategy of Axis Bluechip Fund
Following are the four things that you should know about the investment strategy of the fund.
1. Follows a Bottom-up Approach
Axis Bluechip follows a bottom-up approach and selects stocks that have shown the ability to grow earnings sustainably. It means the fund looks for individual companies rather than going by a top-down approach of selecting the sector first and then choosing the company. Therefore, the stock and sector allocation of the fund can be different from the category.
Here’s one example. As per the September 2021 portfolio, the fund has an allocation of 13% to financial services companies, while the category average allocation is around half at 7%.
|Top Sectors Of Axis Bluechip Fund|
|Sector||Axis Bluechip(%)||Large Cap Category Average (%)|
|Oil and Gas||5.57||7.79|
|Automobile & Ancillaries||3.73||7.59|
|Sectoral holding in Sep 2021|
Even when it comes to stock selection, the fund manager’s conviction reflects in Axis Bluchip’s portfolio. You may find stocks in the top holdings of the fund which are not present in the portfolio of other large-caps funds, or they may have very small allocations.
For example, Avenue Supermarts is among the top holdings of Axis Bluechip. But very few other large-cap funds hold it in their portfolio. Plus, the allocation is much lower than the Axis Bluechip fund. Other such stocks include Bajaj Finance and TCS.
|Unique Bets Of Axis Bluechip Fund|
|Axis Bluechip||Large Cap Category Average|
|Kotak Mahindra Bank||4.22||1.46|
*Data as of July-end 2022
2. Concentrated Bets
The outcome of a high conviction strategy is a slightly concentrated portfolio when compared to peers. While a large-cap fund is generally seen holding around 40 stocks in the portfolio, Axis Bluechip would typically have around 30 stocks. This results in a compact portfolio and aggressive stock bets.
Over the past one year, the fund has held 26-37 stocks in its portfolio. This number is on the lower side compared to its peers, where the average number of stocks held is around 42.
The top 10 holdings account for around 60% of Axis Bluechip’s portfolio, which is on the higher side when compared to the other funds in the category.
3. Swift Cash Calls
The fund manager doesn’t hesitate to take active cash calls in case of a lack of opportunity. This helped the fund protect its downside during the market crash in March 2020.
Axis Bluechip was holding above 20% in cash just before the market crash. The fund manager brought it down to below 5% in a span of around 5 months.
The following graph shows how the cash allocation of the fund has moved since its inception.
4. Sticking to large-caps
As per SEBI regulation, all large-cap funds need to invest at least 80% of their assets in the top 100 companies by market capitalization (also known as large-cap companies). For the remaining 20%, a large cap fund manager is free to invest across market caps. In fact, many fund managers do invest in the mid-cap and small-cap space to generate better returns.
Axis Bluechip, however, follows a different approach. The fund manager is not seen taking considerable bets in mid and small-cap stocks to generate alpha as done by some of the other large-cap funds.
Since December 2018, Axis Bluechip hardly had any mid or small-cap stocks in its portfolio. On the other hand, its peers have around 10% allocation to mid and small-cap stocks.
So, Axis Bluechip is an outlier here as well.
Is Axis Bluechip A Good Fund To Invest In For The Long Term Now?
As mentioned, Axis Bluechip has underperformed its benchmark and category average in the last two calendar years. Should this worry investors?
Despite the recent blip in performance, the long-term track record speaks volumes about the fund manager’s ability to deliver category-beating performance. Axis Bluechip has delivered well over different market cycles, and there is no reason for investors to worry about the recent underperformance of the fund as it is still among the top performers over the long term. Therefore, it is a good bet for those who are looking for an actively-managed fund in the large-cap space.