Performance is created by selecting appropriate businesses for the portfolio

BFSI Industry Interview
On: Apr 4, 2019 | Duration: 1.00 hrs | From: Advisorkhoj Team
BFSI Industry Interview in Advisorkhoj - Performance is created by selecting appropriate businesses for the portfolio

Mr. Gaurav Misra is co-fund manager of Mirae Asset India Equity Fund along with Mr. Neelesh Surana & Mr. Harshad Borawake since 31st January, 2019. Prior to Joining Mirae Asset, Mr. Gaurav was associated with ASK Investment Managers Pvt. Ltd. for 14 years.

Mr. Gaurav is an MBA from IIM Lucknow and BA Economics (Hons) from St. Stephen’s College, Delhi.

He has a rich experience of over 23 years in Institutional and Private Equity.

For the benefit of investors and distributors among Advisorkhoj readers, please explain the planned changes in attributes of Mirae Asset India Equity Fund?

The fund has been re-categorised as a Large cap fund from the earlier Multicap. There however, is no change in our investment philosophy and the investment process continues to remain the same. The fund, since July 2016, has had over 80% of its stocks in large caps. For long period of time the fund has had 75% (+/- 5 to 10%) in large caps. The investment philosophy and approach do not change on this count. There have been no changes to the stock/holdings either, on this count.

Please explain, why you are changing the category of Mirae Asset India Equity Fund from multi-cap to large cap?

Since it has already been running with a predominant large cap(>80%) bias, it was only appropriate that its categorization reflect the same.

Over the last few months, there have been many articles in leading online business news portals about actively managed large cap equity funds struggling to create alphas. For the benefit of our readers, please share your views on this issue?

Performance is created by selecting appropriate businesses for the portfolio. That will be irrespective of the market capitalization of the business selected. There can be aberrations in the short term but over longer periods good business chosen at a discount to the fair value will lead to satisfactory performance. Over the trailing 4-5 quarters the large cap index has done better than the other indices. However the large cap index was largely been driven by a few heavy weight stocks while a majority of the others and mid/small cap indices have underperformed. Large cap funds which would not have adequate representation in those few stocks would have been relatively impacted. I believe there are a number of businesses in the larger capitalization category which face good prospects, have a fairly profitable business model and should create/continue to create wealth as they grow in the years ahead. Such businesses if chosen judiciously will help the large cap category to do well.

Over the last 3 years, Mirae Asset India Equity Fund has given 18% CAGR returns and more than 20% CAGR returns over the last 10 years. In our view, you delivered very high return which is great for investors, but as the stock market becomes more efficient it gets increasingly difficult to sustain this level of outperformance in the long term. However, based on our online interactions with many investors, we have seen that past performance often becomes the baseline of investor expectations. As asset managers, what will you tell investors with regards to future expectations of returns in general for equity funds?

We think an annual performance in the range of 12%-16% could be the expectation from well managed equity funds.

What will be your investment strategy for Mirae Asset India Equity Fund, post its change to a large cap equity scheme?

Investment strategy and approach will not change. Our investment philosophy is centered on participating in quality businesses, but upto a reasonable valuation. We seek to identify growth-oriented businesses, run by competent management, and yet available at reasonable valuations. Analysis of all three buckets – Business, Management, and Valuation is important from a risk-reward matrix.

We will seek well run profitable businesses, with a large opportunity to grow at the best possible valuations. Additionally we will keep some space for deep value/turnarounds/cyclicals.

We appreciate that you have spared the time from your busy schedules to address our questions. We would also like to use this opportunity to get your outlook on Indian equity from the medium to long term perspective?

We are confident that from a medium term perspective Indian equities will continue to deliver better returns than most alternate asset classes. This will be driven by the inherent growth of the economy and the corporate sector’s ability to successfully participate and drive this growth.

Finally, what is your advice for existing and prospective investors in Mirae Asset India Equity Fund?

Investors should spend some thought on their investment objectives. Mirae Asset India Equity Fund is positioned to deliver value as a core Equity holding for investors with a long period horizon. Existing Investors should remain invested. However, both existing and prospective investors should consider their current allocation to equities and to the core equity holding within that. If that is inadequate, than it would be advisable to strengthen this component of their investment pool.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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