For most average investors, investing their money in a fund with a proven historical track record is a good start. The simple answer to this lies in the current state of the stock markets, where the difference between the best performing and the worst performing fund is fairly narrow. The reason for such an outcome is the current bull run, when it becomes difficult to differentiate between the good and the not so good fund.
Thus, it becomes pertinent to check the fund manager’s ability to manage the downside, when it occurs and also their ability to manage a fund with bigger assets because of an increase in money flows into it. It is evident that many a times, short-term performance may be driven by luck, but in the long run, wealth creation has always been driven and heavily influenced by the fund manager's skills.
This week, we will be featuring interviews of eight of the finest money managers, who have repeatedly demonstrated their superior skills with consistent returns, within the defined investment framework of the funds they manage. As you evolve as a mutual fund investor, start assessing fund managers to invest with those who have proven their skills; after all as goes the saying—form is temporary, class is permanent.
Getting the right stocks
What is your approach towards investing in the fund(s) you manage?
We combine both top-down and bottom-up approach for the funds that we manage. A detailed analysis of the macro data helps us identify the sectors we need to have active weights in. Within the sector, getting the right stocks to bet on is important. For that, we look at companies that have strong competitive advantage, faster growth, good management, large addressable market, superior product, technology, etc. At a reasonable valuation, these companies are bought into by the funds.
What is the one theme that you are bullish on now?
Consumption as a basket is what we are bullish on. There is a structural tail wind of lower penetration and increasing affordability in the discretionary segment. The move from unorganised to organised due to GST would help the listed companies increase market share. We are also positive about rural consumption amid focus from the government. Lower interest rate for the borrower is also useful to increase volume or purchases through credit and increase in discretionary income (due to lower interest outgo) which would be spent.
Name the one investing lesson you will never forget.
One of the most important lesson is not to sell stocks too early only due to valuation without fully understanding the potential of the company over long-term.
Mahesh Patil, Co-CIO, Aditya Birla Sun Life Mutual Fund
