We believe manager Sailesh Raj Bhan’s disciplined approach and skilled execution will keep the fund in good stead.
Bhan joined Reliance Asset Management Company in 2003. At that time he was an experienced research analyst, and he didn’t have much portfolio management experience. In June 2004, he took on the role of a portfolio manager at the fund company and has since gained considerable experience running both diversified and sector funds. In our opinion, he has grown into an accomplished manager with funds helmed by him having developed a noteworthy track record.
Bhan adopts a free-flowing investment approach while selecting stocks. He scouts for issues that exhibit strong growth prospects and have healthy/rising ROEs. He constructs a predominantly mid/small-cap portfolio, but he pays more attention to large caps than a typical India Small/Mid-Cap peer. Bhan has a penchant for emerging/niche themes and invests roughly 20% in them, as he believes they have significant upside potential. Another 10%-15% is invested in value propositions to balance the portfolio’s growth bias with a value tilt. Taking big sector/thematic bets also forms an integral part of the strategy.
The strategy has some inherent risks, however. Investing in emerging/niche themes, which largely have untested business models and value propositions, is a risky affair. Bhan’s large sector/thematic bets are also not without risks. A failed call may result in huge underperformance for the fund. However, such instances have been rare thus far.
We draw comfort from the fact that the process is fairly robust with research at its core. Further, Bhan’s research-intensive investment approach somewhat eliminates the risk associated with investing in smaller caps and emerging/niche themes. The time-tested nature of the investment process and the fine execution of the strategy reinforce our conviction in the fund, and hence we reaffirm the fund’s Silver rating.
Morningstar Analyst Rating™
Supporting: Given its small/mid-cap bias, the fund merits inclusion in the portfolio as a supporting holding.
Sailesh Raj Bhan is an accomplished manager who is ably backed by a strong investment team.
Reliance fares well on talent retention, but it actively launched funds when it was trendy to do so.
Bhan plies a free-flowing investment process encompassing multiple aspects while selecting stocks.
The fund has delivered a solid showing on the risk/return front over the long haul.
The fund’s expense ratio is lower than the median of the India Small/Mid-Cap category.