Portfolio construction key to consistent performance, says WhiteOak Capital’s Ramesh Mantri

Mantri mentioned that he is willing to take on the risk of over-allocating to midcap and smallcap stocks in portfolio construction.

Ramesh Mantri, Chief Investment Officer (CIO) at WhiteOak Capital Asset Management, emphasised that for a fund to consistently outperform, portfolio construction plays a crucial role.

He advocates that having a well-built portfolio with a large diversity of stocks is a more reliable strategy for the consistent performance of the fund.

On August 3, while addressing the media, Mantri highlighted White Oak Capital Asset Management's granular risk-taking approach. He explained that out of the 94 stocks in their portfolio, the top 10 stocks only make up 35 percent of the portfolio, indicating a preference for diversification with no significant large bets taken.

Mantri mentioned that he is willing to take on the risk of over-allocating to midcap and smallcap stocks in portfolio construction. He provided two reasons for this approach: First, he believes skilled managers can add significant value in these segments. Second, he expects better-run companies with strong governance practices and efficient management, will remain resilient even during fluctuations in the mid- and small-cap space.

With small holdings, the risks are smaller and stock-specific, according to him. However, he pointed out that one of the fundamental challenges in the mid- and small-cap space, unlike the large-cap segment, is governance issues due to limited knowledge about the behaviour of the promoters.

Even Aashish Somaiyaa, Chief Executive Officer, WhiteOak Capital Asset Management, pointed out that the construction of a portfolio is important to override the risk of underperformance in comparison to the broader market.

“And if you don't want to underperform if you want to outperform consistently, then portfolio construction, viz a viz the broad market is a very, very important thing to keep in mind,” Somaiyaa said.

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