An unwavering focus on the long-term and willingness to back conviction bets are integral to manager Prashant Jain’s investment approach. Hence he doesn’t shy away from trading near-term pain for long-term gains. This approach was on display not so long ago (in 2015) when Jain held on to his investments in public-sector banks (particularly SBI) despite it running into rough weather, and the fund languishing in the bottom performance quartile. This was not surprising as the manager has long favoured public-sector banks in his portfolios as he believes that they will be major beneficiaries of India’s long-term structural growth.
Notwithstanding short-term blips, Jain has demonstrated considerable skill in navigating the fund through varying market conditions over the years. Expectedly, he made a promising comeback this time around as well with his conviction in public-sector banks paying off well, helping it to record top-quartile performance in 2016.
Research is central to the investment style, with Jain effortlessly combining top-down and bottom-up analysis (with more emphasis on the latter) to identify companies with robust business models, strong balance sheets, and competitive advantages. He pays heed to valuations while picking stocks, freely combining relative and absolute valuation methods. While constructing the portfolio, Jain is mindful of the benchmark index weights, but is not benchmark-aligned. His willingness to be disciplined and adhere to his investment style even when it is out of favour is noteworthy.
Admittedly, the process has its biases. The valuation consciousness coupled with aversion to speculative fare may cause the fund to lag peers in momentum-driven markets. Further, in a downturn, Jain’s policy of staying fully invested could lead to underperformance versus peers that get their cash calls right. Yet, we believe the process will hold long-term investors in good stead.
An exceptional manager backed by a strong team, a robust investment approach, and one of the best asset managers in the industry add up to a best-in-class offering, in our book. We reiterate our Morningstar Analyst Rating of Gold.