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.
"Companies with suspect corporate governance rarely change for the better"
What approach do you follow towards investing in the funds you manage?
My investment approach is ‘Growth At Reasonable Price’ (GARP). We try to look for businesses that have proven business models, which are scalable in nature, where capital efficiency is high and that have reasonable competitive edge in their respective areas of business. We also very keenly look at the management track record and its quality. The final filter is valuation in every case. Typically, we look for compounding characteristics of earnings growth at reasonable valuations, and build portfolio around that strategy.
What are you bullish on currently?
Government’s continued focus on affordable housing and infrastructure creation should aid demand in the cement business. With limited capacity creation in the next few years, the industry is well set for higher operating rates with increasing demand growth going forward. The pricing power in the industry is quite strong. High operating leverage in the sector should aid high profitability growth.
Name the one investing lesson that you will never forget.
Leopards do not change their spots; companies with suspect corporate governance rarely change for the better.
Harsha Upadhyaya, CIO – Equity, Kotak Mutual Fund
