This post has been written by Larissa Fernand, editor at Morningstar.in, and Himanshu Srivastava, senior fund analyst.
The first thing you should note about this fund is that its name could be a tad misleading. One would instinctively categorise it under the flexi-cap category, when in reality it is a large-cap fund according to Morningstar’s categorization. In its latest portfolio, it has around 85% allocated to large-cap stocks.
One can argue that having a flexi-cap mandate could also result in the fund moving predominantly into smaller fare at a later date. Point noted. The exposure to the market segment could vary based on numerous factors such as the stage of the economic cycle and relative valuations of stocks. But on an average, over the past two years, the large-cap bias is stark with around 70% of the portfolio in such stocks.
In February 2014, when Sivasubramanian, then the chief investment officer and primary fund manager of this fund, retired, investors questioned whether or not this fund would be worth holding on to. They were justified in their concern to some extent, after all Sukumar Rajah and Sivasubramanian had steadily built stellar reputations for themselves. But investors’ fears were misplaced simply because the fund house is not a slave to the star fund manager syndrome, and their team-driven, investment processes are based on sound logic and intensive research.
The managers of this fund, Janakiraman and Roshi Jain (Jain no longer handles this fund) have not let anyone down. In fact, in 2014, the fund delivered very impressively and found a slot amongst the top 10 performers in its category. Its current 3- and 5-year returns also place it amongst the top 10.
Janakiraman is fairly averse to being put in a box when asked about his investing approach. Very simplistically, he aims to identify good quality stocks and buy them at a reasonable price for a longer period of time. This could result in a contrarian play, a value opportunity, or even an opportunistic move such as a merger or acquisition or a company showing signs of revival from a slump. He avoids companies that have business models which his team cannot easily comprehend and has a penchant for free cash flows.
Since the emphasis is on sustainability of growth and quality rather than flashier momentum plays, there could be periods of underperformance. But investors in for the long haul should not be disappointed.
This fund has been awarded a well-deserved Gold Analyst Rating.
