With assets under management of around Rs 70,900 crore (as of February 2021), Mirae Asset Investment Managers India has a bunch of schemes that are among the best performers in their respective categories. But, for Neelesh Surana, Chief Investment Officer who has over two decades of experience in equity research and portfolio management, the fund house has a long way to go. He explains how his fund house has managed steady outperformance without taking undue risks.
In an interview, he talks to Vatsala Kamat about the stock-picking approach and selling strategies, while also stressing on risk factors that could make equity markets wobble. Excerpts.
Mirae’s schemes have outperformed well over the years. Is it easy to manage returns from these levels as the corpus grows larger?
This will depend on the individual fund category. We are currently ranked eighth in terms of market share of active equity assets under management and believe that we have a long way to grow at a steady rate, particularly in products that are in large-cap or hybrid segments.
We also know that small-caps are generally illiquid. So, because of this aspect and the fact that we are a small team, we haven’t yet launched a small-cap fund. Also, we have restricted inflows into Mirae Asset Emerging Bluechip Fund in the past, when asset growth was too fast within a short period. This fund now has steady and predictable growth.
You equity funds have delivered across markets. How do you manage this?
Our approach is team and process-oriented, driven by the contribution from the research analyst team. We follow a disciplined approach to investing, with focus on “quality up to a reasonable price.” The focus is more on stock selection, through bottom-up approach in growth companies, available at a reasonable valuation. We seek to construct a diversified portfolio, which can handle mistakes and deliver decent risk-adjusted returns.
What is your selling strategy? In a falling market, do you believe in averaging costs of your existing portfolio?
We are bottom-up oriented investors. Most switch or sell decisions are made with after assessment of the intrinsic value versus the market price.
We initiate sells under three conditions:
a) When market price is significantly more than value, we re-assess and sell, if required;
b) When the long-term assumption has changed and we need to take corrective action; and
c) When there is significant discrepancy in valuation of stocks, particularly in the same sector.
What is your view on the hiccups seen now in markets?
Spread and impact of second wave is the key hiccup seen now in the market. Resurgence of COVID-19 cases do pose a risk to FY22 earnings estimates. Markets could exhibit volatility depending on the extent of the second wave. Such volatility could give investment opportunities to adjust long-term asset allocation.
Which macro indicators would signal that equity markets could be tipping over?
We would like to watch for two risk factors. The key risk at this point is the ongoing resurgence of the pandemic, which could pose risks to earnings recovery. In addition, any significant increase in crude prices could impact India’s macros.
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