Your fund is among the few that has performed well despite headwinds faced in the market. What has helped you post such an amazing performance?
Our focus on sustainability and quality has helped us deliver results. Whenever you are buying a business you are buying at certain multiples. This in simple terms means you are paying for 10 or 15 years of earnings today in terms of price. But how do you know if these companies are going to be able to deliver or even remain in existence for that long a period? Therefore, sustainability is the first thing that we see while all the other aspects come later. Overall, we are looking for companies that are not only long-term prospects but are also able to grow and do better than what they are doing now. This philosophy, supplemented by our processes and disciplined approach, has helped us select quality stocks for our portfolios. And the market has rewarded that.
Do you take cash calls on your funds?
We don’t really target cash level for a fund. Cash is more of a residual outcome of our investment process and decision-making. In some of our funds we get significant inflows which we have been deploying on a steady basis keeping in mind how the economy and stocks in our portfolio are performing. We also have to look at how the valuations are evolving in a dynamic market. Our investment call is based on such parameters. In other funds, the cash level is quite limited. Hence, to summarise, we do not believe in taking cash calls in our funds. From the perspective of our fund house, it is the overall beta and risk of the portfolio which is more important. We thus give priority to risk management.
Following the huge underperformance of the broader market in large-cap, do you see prospects of a revival in small-cap and mid-cap funds this year?
This story is from the February 17, 2020 edition of Dalal Street Investment Journal.
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This story is from the February 17, 2020 edition of Dalal Street Investment Journal.
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