The chief investment officer of the country’s largest fund house said that he does not track stock prices or the market levels minute to minute, in fact he may not even know the market level at 2 pm. R Srinivasan, CIO-Equity at the SBI Mutual Fund, said that the “grind” in this line of work looks very different and involves a lot of reading.
Hard work is “highly overrated”, he said, when asked how many hours of work he does in a day. Luck plays a huge, even a larger role than skill, in investing success, said the CIO who has a refreshing tendency for plain speaking.
See the full interview: The secret to buying small-caps, thinking probabilistically and much more | The Wealth Formula
Srinivasan, who personally oversees assets worth around Rs 1.5 lakh crore, was answering questions in the rapid-fire round on Moneycontrol’s weekly show The Wealth Formula, which delves into various investing styles.
On it, he shared about his attitude to work, his biggest mistakes and the person he would trust his money with.
Here are the edited excerpts:
How many hours of work do you put in every day?
“Hard work is highly overrated… the hours of work, I mean. Half the time we pass time,” he said, adding that investing is a “very different ballgame”. Srinivasan said that there is the grind but it has to do with reading, and reading about what the underlying (investee) company does. But reading, according to him, isn’t hardwork but fun. “What we do is fun,” he said.
In an answer to a separate question, he said that he may not even know if the market is up or down at 2 pm. “If the churn (in the portfolio) is less, what is the point,” he asked.
Which is the stock you wish you could forget because it made you lose so much money?
“Kirloskar Oil Engines,” he said.
Srinivasan said that they were “super confident” about the thesis and that his team just kept buying an illiquid stock because they weren’t worried.
“We thought the underlying business is extremely strong, the cash flow conversion to EBITDA was around 120 percent or something like that, and they were good guys. We saw the plant, they were enhancing their product portfolio to compete with Cummins, and there was their agri division, and I thought we should buy as much as we can… then they (the company) decided to put money into financial services and that was the end. We exited at 50 percent lower or so,” he said.
The company got the Reserve Bank of India’s licence to start a non-banking financial services in November 2018, after which the stock nearly 61 percent by March 2020, a period which included the pandemic-led drop for the broader market. The stock has since recovered and has even made new highs.
If you were not managing your own fund, who would you trust your money with?
Srinivasan said that he has all his money in the funds he oversees. But, a fund manager he trusts outside of that would be Pankaj Tibrewal, Senior Vice President and Fund Manager-Equity at Kotak Mutual Fund.
A behaviour that has been hard to correct…
He said that he has confirmation bias, which he is trying to correct and is constantly correcting for. Srinivasan said, “I'm looking for ideas that counter that confirmation bias, despite that, I am happy when somebody kind of concurs with me… But then I'm immediately thinking about the opposing argument.”
How much of your success comes from skill and how much from luck?
“Largely luck,” he said, adding that he wasn’t being modest.
“Obviously, there is an element of skill and as you get better skill straddles luck, but as somebody who's been around for so long, it's largely luck,” said Srinivasan, adding that knowing this makes him extremely insecure.
The investment stalwarts you admire…
“There are many but I think I love the Nalanda (Capital) guys, they are very clear (in their thinking). Then, I love Michael Mauboussin, he is amazing in the way he articulates (his thinking),” said Srinivasan. Mauboussin is the head of Consilient Research at Counterpoint Global, Morgan Stanley Investment Management, the adjunct professor of finance at Columbia Business School, the Chairman Emeritus at the Santa Fe Institute and the author of three books that are considered among the best on the subject of business.
How much time to do spend reading?
“I have this constant struggle. I like to read. I want to read more. But I also watch a lot of crap. So, I have decided that from now on, I won't watch Netflix from Monday to Friday… I still sometimes break that,” he said, adding that he tries to catch up on his reading when he is travelling, like when he is on a flight.
He said he would highly recommend Ted Chiang’s short stories, which are “phenomenal” and “out of the world”. Chiang is an American science-fiction writer and Srinivasan added that he is an avid science-fiction fan.
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