In interview with Outlook Money Shreyash Devalkar, Fund Manager - Equities, BNP Paribas Mutual Fund says investment universe comprise about 220 stocks
1. What is the composition of the fund and what is its stock selection?
We are overweight on private sector banks, telecom and healthcare while underweight on IT, industrial capex, metals and energy sectors.
2. What is the investment universe for this fund?
Investment universe comprise about 220 stocks. The stocks are selected based on our BMV (Business, Management, Valuations) philosophy of investing. The stocks having good business in terms of strong moat, growth and catalyst are selected. Evaluation of management is mainly by way of its aspiration to grow and corporate governance.
3. Does the three year lock-in help when managing this fund?
Our philosophy of investing is based on long term outlook of the company’s business prospects, irrespective of the lock-in. In this particular fund the investment horizon of investors matches with fund philosophy.
4. What does it take for a stock to enter this fund?
The investment objective of the scheme is to generate long-term capital growth from a diversified and actively managed portfolio of equity. We believe that ‘it is companies that create wealth, not markets’. The companies are thoroughly researched internally by our experienced research team with an aim of ensuring that only the most suitable companies make it to our portfolio. Our investment philosophy of focusing on BMV framework for selection of companies in portfolio has helped in its consistent performance. Various investment ideas are filtered through our BMV framework of company selection before adding it to investment universe. The business fundamentals are analysed based on different parameters like secular trends, uniqueness of business model, moat of business, etc. Management’s execution capability is key in delivering sustained returns within the realm of industry dynamics and corporate governance are important parameters. Growth At Reasonable Price (GARP) is the philosophy that is followed while assessing valuations.
5. What is the average holding period of stocks in this fund?
Unless there is change in business outlook, we do not churn the portfolio often. Our portfolio turnover ratio is less than 1.
6. What should an investor expect when investing in this fund?
This fund has exposure to large as well as mid-cap companies. In our opinion, the diversified funds having good mix of both large-caps and mid-caps companies would tend to perform better since opportunities exist across market capitalisation.
7. What will you attribute the relatively superior performance of your fund to in recent years?
We are a team of experienced professionals in equity markets with sector specialisation. This coupled with our philosophy of investing in companies having strong moat has helped us deliver relatively superior performance.
8. What is an ideal portfolio size for this fund?