Retail investors would be better off if they understand the fund strategy and its suitability to their asset allocation plan

How has been the start of Q3FY2024? Recent product launches and the pipeline?

Q3FY2024 has started in the right earnest. For the equity market perspective H1FY24 results have been inline with a positive bias in some of the sectors. The festive season has been strong for consumption demand with good long wedding season taking the baton from here on to keep the consumption demand going. The green shoots in the rural demand is visible & should grow strong from hereon. Orderbook driven businesses are seeing good traction in order wins from the government. Private sectors capex is also strengthening. The only dark cloud on the horizon is the slow down in exports due to recessionary fears in the western world. The start has been good for us too. We have crossed an AUM of Rs 6500 cr within six month of our launch. We have recently concluded the NFO of our banking & PSU fund on the debt side & just opened the NFO for our BAF on 24th November.

Could you tell us something about your Investment process for identifying the right sectors & stocks?

We define our investment philosophy as INQUBE. It stands for the three sources of alpha generation, Information Edge, Quantitative Edge and Behavioural Edge. We use tools that have the potential to provide these three edges for long term investment success. The stock selection process involves top down as well as bottom-up screening to identify strong business models with good management teams.

Setting the entire Investment Team must have been an exciting experience. Can you share something about your team size, their previous experiences, across the investment function, Equity & Debt?

Yes it has been really an enamouring experience. While setting up the investment function at Bajaj Finserv AMC, our endeavour has been to avoid popular misconception around size, structure & diversity. Often large size teams are considered to be better, but research tells us as team size increases it gets difficult to coordinate & also increase conflicts. Small team with the right structure & process perform much better. On structure, rather than structuring the research team on based on sector allocation, like a sell side research house, we created strategy based focused team instead. Idea is to be selective & focussed towards the investment philosophy of the house.

A special emphasis has been on soft skills & building the culture. Jim Ware & Michael Falk at Focus Consulting group highlight, soft skills like commitment to one another’s success, capacity & emotional decision are an essential part of a successful team. We have built a culture of idea meritocracy within the investment team. As Ray Dalio puts it “a decision making system where best ideas win out”. Also, we have created an environment of ‘even when we disagree we have mutual respect’

As a Fund house, are the ideologies more Growth oriented, Value oriented or blend of both (GARP)? Please share your / house views on these different styles, especially from the perspective of Indian markets?

Our investment philosophy ‘INQUBE’ helps us

As a fund house, will there be a higher focus on Active funds as a strategy or will launch some passive funds as well?

We have a very clear thought process on product offerings. The active products will not be rolled out based on ‘opportunity size’ or ‘what’s hot as per sales team’ but wherever the investment team thinks it can add differentiate and add value for the investors. In August-23, we came out with our first equity product, An active equity fund in the flexi cap category with a Mega Trends approach. Recently, we have come out with our BAF offering with a behavioural overlay. We plan to launch a judicious mix of active products, passive products & smart beta strategies over next few quarters. Each of the strategy we launch will have its unique positioning & suitability for investors asset allocation plan

While managing an equity fund, what do you believe should be top priorities?

A fund manager should have the following priorities in mind while managing an equity fund

• The investment philosophy followed by the fund should enhance the ability to generate sustained alpha over long term.


• The fund should be true to label. If the mandate is being flexicap it should run like a flexicap


• An active strategy should have significant active weight. The fund manager should avoid index hugging


• Capital appreciation should be balanced with mitigation on impact on capital invested

From an investor’s perspective what are the benefits of investing in a new fund versus vintage funds? Please explain for the benefit of retail investors and mutual fund distributors?

Instead of looking at from a new vs. vintage perspective. Retail investors would be better off if they understand the fund strategy & its suitability to their asset allocation plan. While vintage fund do come with a track record which helps investor take informed decisions, very often than not past performance by the vintage funds do not have any bearing on future performance due to change in size, style & the management team. A well-researched New fund offering have what we call as a last mover advantage. They learn from mistakes done by vintage fund and incorporate checks & balances so that they can avoid similar errors.

What are your views on current market conditions and your outlook for Indian equities from 3 to 5 year perspective?

A few constructs within the Indian economy makes us bullish on Indian Equities from a 3-5 years perspective. A revival in residential real estate & private corporate capex after a hiatus of 7-8 years gives us comfort on continued earnings upgrade cycle of corporate India for next couple of years. Strong corporate balance sheet & a well-capitalised banking system gives additional comfort. On valuations, currently, large cap companies are available at attractive valuations. However, we do expect a volatile time considering the global political and geo political set up in the next few quarters.

On the fixed income side, we believe this is an opportune time to lock in good prevailing yields. Over the medium term, we could also see benefit of potential capital gains as interest rates turn downwards. We are hence launching a balance advantage fund which has the potential to benefit from the current market conditions.

Through this interview, what message would you like to give to Distribution Partners & Investors, given the current market dynamics?

Globally, the equity markets have been anticipating a sharp slowdown in the US economy and waiting for interest rates to soften for quite some time. These assumptions start getting priced in towards the event. So, a recent fall in US 10 year was something that equity markets have been slowly pricing in. However, from October end, there has been a rally in the equity markets globally. As far as India is concerned, Equity, Debt as well as currency markets have been performing quite well compared to other peer countries in the world. The focus of market participants has also shifted towards political and geo-political events. Such events cause uncertainty and hence volatility in the markets. With the long-term outlook of India being positive, long term investors can use this volatility to build a good long term portfolio. A well-managed BAF which incorporates both fundamental & behavioural exigencies can be a good vehicle to benefit from market volatility.

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