“the years when the value is doing well, we will take them in our stride”
Should asset management firms be device makers or should they just provide advice to investors, such as stopping entries when markets are overvalued?
There are customers who expect some kind of pointers. And there are customers who just want to use your products, because they manage any portfolios, changes, etc. Take, for example, products that have built-in advice, say, balanced benefit products, or a fund of funds (FoF) scheme. Someone coming over there is obviously looking for a product that has built-in guidance. Then there are people who say no, I don’t want your large cap to become like a mid cap, which now can’t happen anyway. So you basically have to have products that cater to both types of investors. I don’t think you should close a product just because you think valuations are high. If we think there are instances where we think products may become inappropriate for people, we might as well not launch them in the first place. There has been a constant debate in narrow sector funds. And when all is well, everyone enters. But no one can tell you when to go out. You can, however, close a fund due to capacity issues. For example, if it is too large for its target universe of actions.
Is Axis AMC also associated with growth investing?
It’s the only thing we do. Even before launching the first fund, we made it clear that we wanted to be a quality-driven, growth-oriented fund house. Basically, only 5-6% of stocks actually generate all the returns in a market.
Now it’s not on an annual basis anymore. But if you take, say, 5 years, 10 years, 15 years, 20 years and more, then the percentage of companies that actually build or create wealth just keeps going down.
Now, having made that call as well, it’s true that there will be years when the stock does well. What is this so-called value, I do not go into it. But let’s say a lower quality can do much better. We’re happy to take it in stride, because yes, it will happen. The other thing is that I think we’ve seen we all have much longer careers than what we’ve seen in the past. Ultimately, if you take a higher risk, it may work for you for a year or two, but it will never really last long. So we are completely comfortable with our style.
How should investors interpret your launch of a “value fund”?
In the market, we think there is something called growth and something called value. We disagree with this approach because very often cheap stocks are cheap for a very good reason. For us, value is ultimately about long-term value – that is, are we able to look at five years and say that would be value? We basically said that we wanted to present our investment style from a value perspective. So you will find that while there will be a difference in the wallets, there are commonalities in thought with the existing quality wallet. So here too we always espouse quality, with a bit of a twist.
Ultimately, as a full-service house, it’s our job to make sure we have offerings that can meet the needs of different investor segments as long as we’re confident we can handle them for the long term. and in our unique style.
On the hybrid side, you recently converted one of your funds to a balanced advantage.
This fund has always been called dynamic equity fund. So the philosophy of changing equity exposure in response to market conditions has always existed. Now the way it happened was that it was called a dynamic equity fund and people didn’t understand what it was. And while in some cases we may be category builders here, whether we like it or not, from our perspective, we are followers. So we decided to change the name. So while the objective and construction of the product remains broadly similar, we have also taken this opportunity to review our rebalancing strategy and patterns and made some adjustments to account for extreme market moves, which are increasingly becoming more frequent.
There is some excitement in the market around new technologies like blockchain. And some AMCs have chosen to drop new feeders supporting these themes. Is this the best way to approach these new technologies from an investor’s point of view? And do you hope that Sebi will increase the overseas mutual fund limit?
To answer your second question first, I think Sebi understands. We are awaiting the RBI and a decision from the government on this.
The first question is what about things like blockchain. I think the theme is too narrow. Most people think of blockchain as a cryptocurrency to begin with, but obviously it’s way beyond that. And I think some of the people who have applied for such funds have already shown that.
But what usually happens is that people want to make these funds because the last six months or a year has been great. It is entirely possible that the next five years will also be excellent. But what we would prefer is that we group some of these technologies into a more diversified theme. Yes, there will be businesses that will do very well and some revenue will probably drop to zero. Every time we do that, we’ll link things like biotechnology or something around it so that it also becomes a reasonably diverse area for the fund manager. If something goes wrong in the blockchain, the money can be allocated elsewhere.
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