ASK Investment Managers, once a portfolio manager known for garnering loads of money from investors, is now facing challenges to stop investors from walking away and has lost more than 3,700 clients since the start of the current calendar year.
Since January, ASK’s portfolio management services (PMS) has lost 3,751 clients, as per data from the Securities and Exchange Board of India (SEBI). This is the highest client outflow among leading portfolio managers during the same period, as per data from PMS Bazaar. Currently the PMS arm of ASK Investment Managers has 12,923 clients across strategies.
Distributors are of the view that while Bharat Shah, the whole-time director of ASK Investment Managers, has long been known for his commitment to quality stocks, this focus has led to underperformance in various strategies of ASK Investment Managers, making clients re-think their loyalty.
Even the firm’s AUM has come down to Rs 23,952 crore in September from Rs 25,851 crore in January.
More importantly, the returns across various sectors are also showing a very subdued picture. ASK Investment Managers' six schemes have given an annualized return of 9-14 percent in the last three years, while the industry average returns are 19.7 percent. We calculated the industry average considering the same benchmark as ASK's schemes which is S&P BSE 500 TRI.
The reason for underperformance in ASK’s portfolio, as per industry players, is more to do with the managers’ stock selection philosophy – buying quality stocks. Quality stocks are the ones with solid fundamentals and take into account companies with higher ROE, ROCE, ROA, free cash flow to sales, and others metrics.
Incidentally, the last few years haven’t been that great for quality stocks. On the contrary, growth stocks across sectors like PSUs, railways, shipbuilding have shown a solid game.
“Past performance is the first thing that investors see. If the recent past performance is not great, investors aren’t keen on staying back,” said a distributor of ASK.
He added that investors can digest 2-3 quarters of underperformance but if the underperformance continues for more than 10 quarters, no investor will be patient.
He said that the PMS has tried to do course correction in the last one year by adding reasonably valued stocks in its portfolio, and moving away from overvalued stocks.
The intent might be right, however, the manager’s decision had led to a churn of around 80 percent and investors ended up paying more tax on churn for the same, said a Mumbai-based distributor wishing not to be named. This assumes significance as a higher tax on churn lowers returns further.
Another possible reason for investors leaving ASK PMS could be a larger AUM, said another ASK distributor on the condition of anonymity. The person added that there is a perception that smaller the AUM, better will be the returns. Plus, PMS firms with smaller AUMs are able to offer certain niche, so investors many-a-times prefer such firms over the larger ones.
ASK Investment Managers did not respond to the queries sent by Moneycontrol.
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