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. Rajeev Thakri
Age: 48 Years
Education: B.Com. (Bombay University), Chartered Accountant, CFA Charter Holder, Grade ICWA
Experience: 20 Years
5 Year Asset Weighted Return: 20%
Average 5-year AUM: Rs 2,564 crore
Risk Adjusted Return: 1.09
Fund Managed: Parag Parikh Flexicap
AUM (Rs. in crore): 13,187
Annual Return (%)
- 3-Years: 22.84
- 5-Years: 20.53
Profile
Rajeev Thakkar emphasized that the move towards digital transformation had started even before the pandemic hit; Only after that it accelerated. The fund benefited greatly from their initial forays into this area. Amid the crisis in the financial services sector, Thakkar shifted from lending-based businesses to fee-based companies. He has also avoided landmines amid the pandemic-led shake-up by staying away from weak, leveraged businesses. Thakkar’s fund occasionally uses cash as a shield during market excesses. This allowed them to quickly deploy 10-12% of their cash during the market crash last year. However, as new ideas became scarce, the cash position again crept in. Meanwhile, another lever that depends heavily on Thakkar is the allocation in foreign equities. He stressed that these players are well positioned to capture opportunities from the transition to the digital space.
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my reading of the market
Good news and good valuations rarely go together. In March and April of 2020, the headlines were very bleak and the valuations were very attractive. Today, there is clarity in terms of the vaccination path and its subsequent opening up and normalization of life. There is already some normalcy in Western countries. Given this environment, the valuations in the market have increased significantly. It is time to be selective in buying, as there are many pockets of overvaluation.
How is my fund located
Parag Parikh Flexicap Fund does not chase a momentary craze like reopening of business and businesses or some newly listed highly valued companies. We stick to companies that have good management pedigree, good business characteristics and fair valuations. Wherever we face valuation issues, we are reducing our holdings and may see some increase in cash holdings over time.
Top sector bets and top stock selection
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2. Neelesh Surana
Age: 52 Years
Education: Bachelor of Engineering with MBA in Finance
Experience: 26 Years
5 Year Asset Weighted Return: 21.0%
Average 5-year AUM: Rs 9,806 crore
Risk Adjusted Return: 0.90
Fund Managed: Mirae Asset Emerging Bluechip
AUM (Rs. in crore): 19,568
Annual Return (%)
- 3-Years: 22.01
- 5-Years: 20.74
Fund Managed: Mirae Asset Tax Saver
AUM (Rs. in crore): 8,739
Annual Return (%)
- 3-Years: 19.45
- 5-Years: 20.17
Profile
Nilesh Surana has refrained from overpaying for shoddy businesses as well as good businesses. A substantial portion of their fund is set to benefit from a long-term structural revival. This has ensured that the portfolio is able to withstand intermittent disruption. At the same time, he retains some share in beaten-down value plays that are well-valued to capitalize on from cyclical recovery. Surana emphasized that the market opportunities are skewed towards large businesses and hence leading to large franchises in both large and midcap segments. Surana points out that the lower cost of capital will lead to a huge increase in earnings and valuations in these businesses.
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my reading of the market
The economy is stabilizing after the instability caused by the pandemic. Our outlook remains constructive, driven by improved earnings outlook, lower cost of capital and fair valuations. After partially discounting a possible cyclical and structural revival in earnings, the market has firmed up. Investors should follow a balanced allocation and remain committed for the long term.
How is my fund located
We follow a two-pronged approach. Our core portfolio is invested in high quality businesses up to an appropriate valuation. On the other end of the spectrum, we’ve also run into “deep-in-value” opportunities. Regionally, the fund is positioned to capitalize on secular growth opportunities in BFSI, consumer and outsourcing disciplines.
Top sector bets and top stock selection
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3. Ajay Tyagi
Age: 42 Years
Education: Masters in Finance, CFA Chartered Holder
Experience: 21 Years
5 Year Asset Weighted Return: 17.3%
Average 5-year AUM: Rs 8,755 crore
Risk Adjusted Return: 0.75
Fund Managed: UTI Flexi Cap
AUM (Rs. in crore): 20,922
Annual Return (%)
- 3-Years: 18.19
- 5-Years: 16.96
Profile
Ajay Tyagi’s investment philosophy rests on two pillars- buying businesses that create economic value and grow it sustainably. He insists that staying true to this path requires a lot of conviction. The real test of a business’s character is when the chips are down and that is why it emphasizes companies that have strong track records of profitability, ability to protect market share and generate cash flows in cycles. . Tyagi insists that concentration within a portfolio is like a good friend, but not like it either. No matter how good someone is at picking stocks, there are bound to be some company-specific mistakes. He argues that markets are never reasonably priced, but he firmly believes that as long as one is riding the right types of businesses, value creation will eventually catch on.
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my reading of the market
Markets are pricing in a strong revival in earnings in the near future and some of this is reflecting the strength shown by the businesses. Management commentary remains optimistic and consumer sentiment remains positive. The demand trajectory in the coming months remains an important factor to monitor as India slowly enters a festive period that has historically seen a pick-up in consumption. This is especially important as valuations are about 20% above average and therefore any slack in earnings growth could lead to a fall.
How is my fund located
We follow a bottom up approach for portfolio creation. We do not churn our portfolio much and keep investments for a very long period. We remain and will continue to be bullish on businesses in the healthcare, consumption, private banks and information technology sectors.
Top sector bets and top stock selection
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4. Vinay Paharia
Age: 41 Years
Education: B.Com, MMS
Experience: 19 Years
5 Year Asset Weighted Return: 16.8%
Average 5-year AUM: Rs 497 crore
Risk Adjusted Return: 0.73
Fund Managed: Union Flexi Cap
AUM (Rs. in crore): 645
Annual Return (%)
- 3-Years: 16.37
- 5-Years: 14.19
Fund Managed: Union Long Term Equity
AUM (Rs. in crore): 391
Annual Return (%)
- 3-Years: 15.78
- 5-Years: 13.03
Profile
During his tenure in two different fund houses in the last five years, Pahadia has faced different situations. As CIO at Union Mutual Fund, he has found comfort in driving a sophisticated company-wide process for his vision. He noticed that investors’ time frames are getting shorter in recent years and performance concerns are increasing. Managing these short-term expectations poses a challenge. What helps in this environment is the discipline of sticking to established procedures. Paharia insists that sometimes, good businesses do not do well as cycles change but sticking to them in good and bad times is the key to building long-term wealth. The fund’s mandate is to be flexible in market cap positioning and has made full use of this leeway to navigate changing market conditions. Preferring a growth-biased portfolio, he remains valuation-conscious but shuns a simple reliance on the price-earnings metric in favor of a fair-value approach to stock picking.
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my reading of the market
The markets are trading at a premium to their current fair value. We have borrowed some returns from the future. The economic growth is expected to pick up from the second quarter of this financial year, which may result in decent growth in fair value of companies.
How is my fund located
We have invested heavily in large caps. Our in-house fair value approach is used to select quality companies and employs a quanta-mental approach to build an optimal portfolio.
Top sector bets and top stock selection
5. R. Srinivasan
Age: 50 Years
Education: M.Com and MFM
Experience: 28 Years
5 Year Asset Weighted Return: 16.7%
Average 5-year AUM: Rs 5,507 crore
Risk Adjusted Return: 0.73
Fund Managed: SBI Focused Equity Fund
AUM (Rs. in crore): 17,847
Annual Return (%)
- 3-Years: 16.57
- 5-Years: 16.07
Profile
Despite the aggressive stance that underpins its mandate, R Srinivasan’s core philosophy behind SBI Focused Equity remains the same as that of a small-cap offering. It was also run as a compact portfolio in its earlier avatar as SBI Emerging Business. Srinivasan remains fully invested at all times, stays away from any kind of cash calls. The portfolio is quite active, different from the benchmark index. The priority remains to have long-term compounding stories driven by good management. While the fund remains sector agnostic, it is no longer market cap agnostic – given the increase in the fund’s asset base, leaning towards the large-cap space. In addition, the fund has now started investing in foreign equities, driven by higher premiums on a limited number of quality domestic businesses.
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my reading of the market
Lower rates and liquidity supported the market. We are clearly positive on earnings, but it appears that the markets have taken the positives into account and are pricey from a risk-reward perspective.
How is my fund located
Pre-Covid, the portfolio was positioned for an economic recovery and significantly overweight financially, which hit us very badly in the fall. The fund is now positioned defensively and will likely underperform in a fast-moving market.
Top sector bets and top stock selection
(Source: Morningstar India)