Principal PNB Asset Mgmt eyes Rs 350 cr via NFO

A: I think most of the money comes towards the end; so far the response has been encouraging.

Q: What kind of money you are looking to collect?

A: We are targeting about 350 crore.

Q: How will this investment be spaced out? How long do you think it will be before you are fully invested?

A: We hope to invest the entire money in about two month's time. We don't intend to take cash calls, we have got a small flexibility of about 35% to buy non-midcaps. In case we don't buy, we don't get the quantity of the stocks that we are looking at. We might park in large caps for a little while.

Q: That will be just temporary parking or is there a mandate or how long you can keep money in large caps or is it upto the discretion of fund manager?

A: No, it's going to be predominantly mid and small cap. This is purely going to be temporary because we don't want to be taking cash calls in the market.

Q: What percentage on a roughly calculated basis? What percentage of the total portfolio could be invested in large caps?

A: Maximum we can do is about 35% but on a fully invested basis in three months time it will be 90% mid and small caps.

Q: You are essentially looking at midcap stocks which have a market cap of less than Rs 3500 crore and in the small cap space you are looking at stocks with the market cap of less than about Rs 600 crore - what is going to be a primary parameter to go about fishing for stocks in both these segments?

A: We have Rs 3500 crore as a market cap because that's a cut off for a large cap fund. So anything less than Rs 3500 crore is midcap for us which is practically anything which is not the top 150 companies is the population for us. We already have a few funds which are midcap space but they are in the form of ELSS funds. We have got two ELSS funds which are doing extremely well. We have got a Child Benefit Fund which is a small cap fund. So we already have a team which is working on a portfolio of midcaps, so we are going to be looking at these stocks.

Q: Is it going to be sector specific or stock specific?

A: No, it's going to be purely bottom up.

Q: Throw some more light on how are you expect the markets to perform in general for the remaining part of the year and more importantly how do you see a relative performance being built up on the midcaps and the small caps at this point?

A: I think the market looks strong on fundamentals, there is an issue on valuations, I think you won't see too much of re-rating going forward but you are seeing very strong earnings growth into the future. I think it's very difficult to predict what the markets are going to do in the short-term. In the next one year the market might as well remain flat but we think we are looking at a return of anywhere between 15-25% over a two-three period. The midcaps and small caps, I think the point here is that you have got a larger population there to look at and you can definitely create that alpha in mid and small cap stocks.

Q: So 15-20% on annualized basis, is what you looking at?

A: Yes, in this particular midcap fund we are targeting the rate of return of 25-30%. We hope to double the money in about three years time.  

Q: What are the other funds you manage?

A: I manage the large cap fund, the Resurgent India Fund both the tax savings funds, one tax saving, there is one personal tax saver, child benefit fund.

Q: I will go by the standard past performance and no indication of future performance but how have these funds performed?

A: These funds have done extremely well, both are tax saving funds. Even in terms of one year returns we are there in the top four-five funds. Our Child Benefit Fund which is a small cap fund, the equity portfolio in that fund has got about 20 stocks; half the stocks which trade like 3000-4000 shares a day and that fund has been doing extremely well. I think in the midcap space we have been doing well.

Q: When you are saying extremely well what have been annualized returns on this funds?

A: The Child Benefit Fund is a small cap fund, it's a balance fund with about 60% equities. Its done return of about 38% overall, so the equity return is much higher. The midcap funds, the tax saving funds I believe over the last one year has done about 45-46%, I might be few percentage points here and there. The personal tax saver has again done 40% odd, so it's been in the top performing category.