Sticking to the “Smart Alpha” framework and keeping a strong risk-mitigation process in place is our way of steering through this crisis, Vikaas M Sachdeva, Chief Executive Officer, Emkay Investment Managers, said in an interview with Moneycontrol’s Kshitij Anand.
Q) D-Street got excited about a second stimulus package. What are your expectations?
A) What you have been witnessing for the past several months is a more pragmatic approach towards legacy socialist issues like the alleviation of poverty and universal healthcare for all by not doling out subsidies and piecemeal solutions, but attacking the problem at its root by creating jobs for large sections of the population through catalyzing industry.
Hence, whether it is reducing borrowing rates for corporates for their current growth plans to reduce corporate tax rates to enable them to re-invest for future growth the government has been pulling out all stops.This process has acquired a different dimension due to the pandemic, but I have no doubt in my mind that the government has not lost sight of the long-term objective.
To that extent, I believe that we will see not just ground-level measures in terms of lifting of lockdowns for the industry, but will also see focused stimulus packages being released at regular intervals
Q) It was a tough FY and Emkay L.E.A.D. PMS an ideal “Wealth Creation” Portfolio Strategy gave a negative return in the same period but the scheme outperformed Nifty in the same period. March was a difficult month but if we take out March your scheme would have given positive returns. What was your strategy to deals with the COVID-19 outbreak to safeguard your portfolio?
The “Smart Alpha” process creates a clear framework for the fund manager to operate in and manage risks in a better way. While focusing only on the Nifty250 space exclusively, and further curating the universe by focusing on high ROCE delivering companies in the space of value migration and consumption, the strong sectoral leaders that have been invested in, will outlive most dislocations in the stock markets.
This mitigates the selection bias most fund managers are subject to in times of extreme duress like these.
Further, by investing in a focused portfolio of 15 stocks on an equal-weighted basis rebalanced annually, the process tries to ensure that no allocation bias creeps in, thereby making the portfolio much less volatile, especially in times like these.
Sticking to the “Smart Alpha” framework and keeping a strong risk-mitigation process in place is our way of steering through this crisis.
Q) How is the next financial year looking according to markets and economic point of view? Will you tweak your strategy to combat volatility in the next 12 months?
A) As mentioned above, we will stick to our “smart alpha” framework which has a well-diversified portfolio across sectors that will capitalize on any wealth creation opportunity on offer.These are leaders with high cash-generating strong balance sheets, cost-efficient and have a great brand franchise which will become even stronger as this crisis ebbsHaving said that, the current crisis will throw up a new set of leaders in some other sectors and could potentially generate far more wealth.