Investment approach
The fund management team has experienced some churn over the past few years. Combined with the change in the economic environment, the investment approach has seen a change.
Satish Ramanathan (who exited in January 2012) had plied a benchmark-agnostic approach across stocks and sectors when constructing the portfolio – he took sizable bets on stocks/sectors where his conviction was high. However, changes were made to the strategy in 2011, possibly to deal with the poor performance in 2009-10. The portfolio’s sector weights previously were loosely aligned to those of the BSE 200 with maximum deviations at +/-8% (absolute).
On the other hand, Venkatesan (who took over along with Srividya Rajesh in 2012 and continued to manage it after her exit in April 2013) has reverted to the concentrated sector approach based on top-down analysis.
A top-down analysis determines the concentrated sector bets based on themes that are likely to work over an 18- to 24-month horizon. Stock selection is based on an analysis of the long-term growth prospects of a business. The manager uses sector-based model portfolios prepared by analysts as the initial reference point when choosing stocks.
Venkatesan adopts a multi-cap strategy and takes lower issue specific risks, with individual stocks rarely accounting for more than 5% of the portfolio and the top 10 stocks accounting for roughly 35% of the assets.
Also, he refrains from cash calls which initially was part of the investment strategy. The fund’s cash exposure was as high as 36% in November 2008 and 27% in March 2009. Venkatesan prefers to remain invested in equities at all times.
Our observation: We would like to see the new investment approach work over the long term to gain confidence in the fund.
To view the fund's portfolio, click here.
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