Investing insights from a manager whose assets grew from Rs 113 crore to Rs 36,000 crore

Tibrewal will be moving on from his position at Kotak AMC after 14 years to start his own independent firm.

Pankaj Tibrewal has described the journey of a fund’s success as watching one’s children grow and become successful CEOs. The senior executive vice-president and fund manager at Kotak AMC shared his thoughts and investment insights in a farewell note. On December 1, Tibrewal leaves the company after 14 years to start his fund.

It was in 2010 that Tibrewal took over Kotak Emerging Equity and Kotak Small Cap Fund, both of which were small funds.

Today, Kotak Emerging Equity fund has grown from Rs 113 crore to Rs 36,000 crore and is the country's second-largest midcap fund. Kotak Small Cap Fund has grown from Rs 127 crore to Rs 13,000 crore and is the fourth-largest smallcap fund.

Across the two funds, Tibrewal said around 400 unique names were identified and invested in, with around 16 percent of these picks in the Emerging Equity Fund and 10 percent in the Small Cap Fund, generating over 10x returns.

Similarly, 18 percent of the picks in the Emerging Equity Fund and 16 percent in the Small Cap Fund generated between 5-10x returns.

“The learning from this success was not only the art of identifying ideas but also nurturing opportunities with patience, especially during bad times,” he wrote in the note.

Over the past 10 years, the Emerging Equity Fund has given around 22.64 percent returns, while the Small Cap Fund has given around 24.3 percent in the same period.

Also read: Senior fund manager Pankaj Tibrewal quits Kotak Mutual Fund to start own fund  

The measure of a fund

Tibrewal said he always favoured consistency over the medium to long term and funds should be measured on rolling returns rather than point-to-point returns.

“The specific start and end dates can heavily influence point-to-point returns. For instance, a fund's performance might look exceptionally good or bad based on a particularly strong or weak period in the market. Rolling returns, calculated over various overlapping periods, smooth out these anomalies, providing a more consistent and representative performance measure,” he said.

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Another important learning has been to invest in businesses that can generate superior returns on capital employed over sustainable periods and growth. This, he said, enabled a business to reinvest the cash flows in the business at higher returns.

“Maintaining a checklist of factors for the company selection is a good habit.  Never compromise quality while investing, especially during bull markets,” he added.

As a house, Tibrewal said Kotak AMC constantly focused on steadily achieving slightly better-than average performance year after year while ensuring its relative position within the top two quartiles. The wasn’t about wild swings or chasing glory, it was about delivering stable, reliable results over time.

Keep calm 

While often stock picking was important, one needed to focus on portfolio construction, a long-term investment “that can withstand significant drawdowns and avoid permanent capital losses”, Tibrewal said.

Above all, one of the earliest learnings he had was about the importance of staying calm and avoiding overconfidence. “Meditation lends mental clarity, enhances the emotional quotient and reduces stress. The market intoxicates us with success but also drains us with failures,” he said.

Perhaps it is the calm and clarity of thought that served him well. "This journey has been beyond my imagination. It feels like watching your children grow into successful CEOs," said Tibrewal.

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