A closer look at the handiwork of these recipients reveals some common threads. Sticking to the core investment philosophy at all times comes front and center for generating sustainable long-term wealth. Many have also insisted on limiting drawdowns rather than chasing immediate glory by riding the pace. At the same time, some have accepted changing circumstances and shown a willingness to adapt to new realities with clever realignment. Read on to learn how the gatekeepers of mass-market equity funds have managed to increase the wealth pie for investors through the ups and downs of the market.
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1. Shreyash Devalkar
Age: 42 Years
Education: Bachelor in Chemical Engineering and Masters in Management Studies.
Experience: 16 Years
5 Year Asset Weighted Return: 19.9%
Average 5-year AUM: Rs 3,464 crore
Risk Adjusted Return: 0.96
Fund Managed: Axis Midcap
AUM (Rs. in crore): 13,834
Annual Return (%)
- 3-Years: 21.07
- 5-Years: 19.35
Profile
Shreyash Dewalkar scours the mid-cap area with a tough quality-biased lens. The clear distinction between growth and sustainability has provided the basis for their stock selection over the years. Like its large-cap offering, Dewalkar has reoriented its mid-cap portfolio to B2B companies in line with the post-pandemic realities. In addition, as more businesses began to participate in the earnings growth, Dewalkar expanded the portfolio from 35-40 stocks to about 55. Their broader preference within the midcap space remains for businesses that either hold leadership positions in a niche sector or challenge larger rivals. Big arena. Dewalkar is very particular about assessing the performance capabilities of company management – an important aspect for growing medium sized businesses. Their ability to smartly negotiate risk in this segment is reflected in the fund’s superior downside protection in the past.
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my reading of the market
The mid cap segment has performed very well in the last one year. Export-oriented sectors such as IT and chemicals have performed particularly well. Bottom-up stories have also emerged on the shift from unorganized to organized, changing dynamics in global supply chains, and management’s increased focus on cash flow and profitability during the pandemic. Although valuations of midcap stocks are quite good.
How is my fund located
We are positive about opportunities in areas such as IT, consumer durables, industrial consumables, cement, chemicals and clean energy.
Top sector bets and top stock selection
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2. R Srinivasan
Age: 50 Years
Education: M.Com and MFM
Experience: 28 Years
5 Year Asset Weighted Return: 22.0%
Average 5-year AUM: Rs 2,563 crore
Risk Adjusted Return: 0.82
Fund Managed: SBI small cap fund
AUM (Rs. in crore): 9,620
Annual Return (%)
- 3-Years: 21.57
- 5-Years: 21.96
Profile
Amid market excesses in the high-risk small-cap segment, R.K. Srinivasan takes extreme caution. He has focused on protecting drawdowns rather than trying to deliver high excess returns. He is quite comfortable underperforming in stages when valuations turn out to be unfair. As part of this strategy, he has expanded the portfolio to soften the risk profile of the fund. He prefers companies with some competitive advantage, scalability, better cash conversion and longevity. He also looks for high margin of safety, which he considers important in this segment. This has ensured a healthy risk-return profile. Always being wary of heavy investments in this sector, the fund has made frequent infusions to maintain the portfolio quality and liquidity. Guided by a firm bottom-up stock selection approach, Srinivasan stood by his faith throughout the market volatility.
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my reading of the market
A lot of underperformance in the small-cap segment has corrected during this market rally. Incremental outperformance will be a function of the overall bullish or bearish trend in the markets.
How is my fund located
While the fund has performed extremely well on absolute returns, thanks to market volatility, it has lagged behind the benchmark on a relative basis. We are not chasing returns and our focus will be on minimizing drawdowns as much as possible. In this regard, liquidity rather its lack remains a challenge. As always, the fund focuses on bottom-up ideas with a long-term outlook.
Top sector bets and top stock selection
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3. Anupam Tiwari
Age: 43 Years
Education: Chartered Accountant
Experience: 13 Years
5 Year Asset Weighted Return: 18.8%
Average 5-year AUM: Rs 1,407 crore
Risk Adjusted Return: 0.74
Fund Managed: Axis Small Cap Fund
AUM (Rs. in crore): 6,785
Annual Return (%)
- 3-Years: 27.07
- 5-Years: 20.75
Profile
At the time of the market crash last year, Anupam Tiwari in Axis Small Cap was not shying away from taking cash calls. He used the opportunity to quickly deploy in both the existing and new names. He has continued to own businesses showing fast income upgradation backed by competent management with a clean governance track record. Given the inherent volatility in the small-cap space, Tiwari prefers to run a low-beta portfolio. Rather than chasing momentum and getting carried away with short-term outperformance, he insists that the long-term play is more suited to this segment. Recognizing that smallcaps are prone to short cycles, he prefers to go through intermittent bouts of pain and stick to conviction as long as the problem is not structural. This approach has placed the fund in good stead amidst sharp volatility in the market.
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my reading of the market
Given the uptrend in stock prices in the recent past, there could be near-term volatility in the small-cap space. However, from a long-term perspective, we are very positive in this segment as the segment is undergoing structural changes in terms of access to talent, access to capital and expanding market opportunities. For any investor who can tolerate short term volatility and stay invested for the next 5-8 years, this is a very good place to build wealth.
How is my fund located
We believe in buying good scalable businesses run by good management with a track record of good execution and governance. We believe in bottom-up stock picking and hence our portfolio has a good distribution from Chemicals, IT, Cement and Cycling sectors.
Top sector bets and top stock selection
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4. Harshad Patwardhan
Age: 51 Years
Education: B.Tech. (IIT), MBA (IIM) and a CFA qualification
Experience: 26 Years
5 Year Asset Weighted Return: 18.9%
Average 5-year AUM: Rs 1,019 crore
Risk Adjusted Return: 0.71
Fund Managed: Edelweiss Mid Cap
AUM (Rs. in crore): 1,600
Annual Return (%)
3-Years: 19.21
5-Years: 17.91
Fund Managed: Edelweiss Small Cap
AUM (Rs. in crore): 1,028
Profile
As clouds began to turn early last year, Harshad Patwardhan leaned on his experience of the 2008 financial crisis. As circumstances change, one needs to adapt quickly to realities. Relying primarily on a bottom-up approach to stock selection, he believes it is important to have an overlay of a comprehensive, top-down framework in times like these. This involves identifying businesses and dividing them into three distinct buckets—delicate, resilient and beneficiary. When the market crashed last year, it quickly deployed this framework. This helped the fund cut down on weak stocks. This increased the presence in the other two buckets. However, the resolve to stick to the fund mandate remained steadfast. The fund neither invested in cash nor sought cover in large-cap names. Diversification is another pillar that Patwarden holds firmly to when playing in an area prone to accidents.
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my reading of the market
Over the long term, a good mid- and small-cap portfolio outperform a good large-cap portfolio. After underperforming large-caps in 2018 and 2019, mid- and small-cap segments have outperformed over the past 15-18 months. We expect a broad-based recovery and better participation from non-institutional investors to help sustain the long-term trend of mid- and small-cap outperformance. However, investors should expect more volatility in this segment.
How is my fund located
We believe economic activity went down from the bottom last year and will continue to rise over the next several years. So our portfolio is ready for economic growth. We are overweight on cement, industrial and real estate sectors. On a relative basis, we are underweight on the consumer staples, domestic pharma and auto sectors.
Top sector bets and top stock selection
5. Pankaj Tibrewal
Age: 42 Years
Education: Received a Master’s degree in Commerce from St. Xavier’s College, Kolkata and Finance from Manchester University.
Experience: 18 Years
5 Year Asset Weighted Return: 18.1%
Average 5-year AUM: Rs 5,931 crore
Risk Adjusted Return: 0.67
Fund Managed: Kotak Small Cap
AUM (Rs. in crore): 5,349
Annual Return (%)
- 3-Years: 26.00
- 5-Years: 19.84
Fund Managed: Kotak Emerging Equity
AUM (Rs. in crore): 15,193
Annual Return (%)
- 3-Years: 19.81
- 5-Years: 17.42
Profile
Even though the mid- and small-cap sector has seen highs and deep lows in recent years, Pankaj Tibrewal has tried to maintain parity across all phases. He stressed that the key to flourishing in market cycles is to persevere in the chosen structure and not deviate from the core philosophy. It also goes a long way in avoiding landmines- an aspect he emphasizes heavily. Amid the current bullishness in the broader market, Tibrewal hasn’t hesitated to take money off the table in stock pricing on very high expectations. At the same time, he remained in the companies on the right track. Easy Money is behind us, he believes, and insists on not getting carried away by the pace. They have prioritized quality franchised businesses boasting pricing power and management integrity, complemented with a strict focus on maintaining portfolio liquidity and diversification.
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my reading of the market
Broad market valuations are no longer cheap and the risk returns do not look favorable in the near term. While valuations still haven’t reached 2017 peak, near-term consolidation/decline cannot be ruled out. Investors should lower their expectations and invest only with a long-term perspective.
How is my fund located
The fund is well diversified and holds the leaders of the sector with strong balance sheets and cash flows. We believe that the bigger the bigger and the stronger the stronger. The manufacturing and capex cycle will revive along with the residential real estate sector. Along with this, there will also be a focus on digitization.
Top sector bets and top stock selection
(Source: Morningstar India)