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.
Practice asset allocation while investing
What approach do you practice towards investing in the fund(s) you manage?
The style of investing I follow is largely value oriented and contrarian in nature. For the schemes that we manage, the approach to investing is strictly in line with the scheme’s mandate. So, if a scheme’s mandate allows cash, we take cash calls based on market conditions. If a scheme’s mandate is to invest in large-cap stocks, we only invest in the large-cap category. On the other hand, if a scheme’s mandate requires no benchmark deviation, in that case, we ensure that no benchmark deviations are taken.
What are you bullish on at this point of time?
We are reasonably bullish on infrastructure space given the prolonged underperformance in the sector.
What would be the one investing lesson that you will never forget?
It is important to practice asset allocation while investing. In bull markets, investors tend to neglect asset allocation. However, we believe that asset allocation is the important factor when it comes to creating long-term wealth. Unfortunately, investors miss this understanding. This is the reason we have been recommending investors to consider investing in balanced advantage category of funds in the current market conditions.
S Naren, ED & CIO, ICICI Prudential Mutual Fund
