Jignesh Gopani, Fund Manager, Axis MF speaks about multi-cap fund - Axis Long Term Equity in interview with Outlook Money
1. What is the composition of the fund and its stock selection?
Axis Long Term Equity is a multi-cap fund with an endeavour to have at least 50 per cent in large-caps and the rest in mid- and small-caps. The fund utilises a ‘bottom up’ approach to identify fundamentally sound companies, while being agnostic of the benchmark constituents.
2. What is the investment universe for this fund?
Based on our investment philosophy, the investment universe is carefully identified across sectors and market caps, based on sustainable earnings growth potential, credible management, and acceptable liquidity of the company. It is periodically reviewed to assess the qualitative and financial parameters of companies.
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3. Does the three year lock-in help when managing this fund?
Yes. With the three-year lock-in feature, the fund can remain almost fully deployed at any point in time with a medium- to long-term view on stocks. The focus on long-term investing insulates the fund from shorter-term market noise, thus allowing us to focus on quality.
4. What does it take for a stock to enter this fund?
We look for following parameters in a stock:
- Sound management pedigree with a track record to manage business across all economic cycles
- High sustainable growth and superior return metrics
- Scalable business model
- Avoid highly cyclical and highly regulated sectors
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Our focus on bottom up stock picking of stocks which has sound business models, pricing power and quality management have consistently created long term wealth for the shareholders
5. What is the average holding period of stocks in this fund?
The intent of the fund is to have stable portfolio with relatively low portfolio churn. Typically, we endeavour to invest in stocks with a view to hold it for 3-4 years.
6. What should an investor expect when investing in this fund?
Investors can expect a high quality portfolio with an endeavour to achieve risk adjusted and consistent returns over a medium- to long-term horizon.
7. What will you attribute the relatively superior performance of your fund to in recent years?
The fund’s investment philosophy is centred on four pillars: fundamental research, pricing power, strong management teams and risk management. Within the fast growing industries, it targets companies with pricing power, cost advantages, sustainable competitive advantages, innovative products or services and ability of the business model to generate steady cash flows over a longer period of time. The fund endeavours to buy and hold high growth secular businesses run by dynamic management with utmost integrity. We have been consistent with this philosophy since day one. This has helped us create long term wealth for the shareholders.
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With a medium - to long-term view towards capturing growth, the fund is biased towards the stocks which can deliver superior returns. This includes private sector banks, autos, auto ancillary, housing and consumption sector, etc. The fund also includes bottom-up stock selection ideas in pharma, IT and defence sectors. The fund has avoided highly cyclical stories and highly regulated sectors.
8. What is an ideal portfolio size for this fund?
We follow a fundamental bottom-up stock selection approach with a focus on long-term investing. We believe in high conviction investing with a compact portfolio of stocks reflecting the best available ideas that fit in our investment framework.
