The past few years have posed tough questions to equity mavens at India’s mass-market asset management companies. The fickle nature of the stock market, with its shifting preferences, has tested their mettle. Fund managers have had to dig deep, revisit long-held beliefs and adapt to the changing realities. Even as they bear the scars of the battle, these experts have kept calm and held their nerve to guide their funds through chaos. In this year’s Best Fund Manager rankings, we have tied up with investment research platform, PrimeInvestor, to shine the spotlight on 10 such individuals, who have delivered healthy outcomes to investors in the long run.
Initially, the preferred growth oriented investing style plied by many of these fund managers fetched superior results. However, as the market gravitated towards the value segment, this approach was tested. Overpaying for quality has burnt many fingers. Most fund managers have stayed true to their convictions, while using the temporary disruption to address past mistakes and improve the resilience of their portfolios.
The common thread visible in the top fund managers’ strategies is the emphasis on avoiding risk and constantly re-evaluating their investing theses. These qualities have helped them deliver healthy risk-adjusted returns over entire market cycles.
Also Read: Top fund managers: How we ranked the fund managers, know methodology here
TOP WEALTH CREATORS OF 2023
1.Rajeev Thakkar
PROFILE
A TORCHBEARER in the value investing arena, Thakkar has proven his mettle with a differentiated take on seeking value ideas that shuns any compromise in quality. He has kept a firm eye on company fundamentals, plying a purely bottom-up approach, even as the rising tide has lifted all boats in the value space in the past few years. That is why he finds little merit in joining the ongoing PSU party, preferring to stick to his quality parameters. He continues to find opportunity in offbeat ideas. For instance, he continues to bet on a leading automaker as he does not see traditional energy phasing out anytime soon. He also finds concerns around ESG in the tobacco business overdone. Thakkar also prefers to hold on to positions for a very long time—even if going through a slump—often yielding massive payoffs for investors. The continued limits on overseas investments have forced his hand into moderating the fund’s geographical diversification plank, but finds comfort in the opportunities in the domestic market.
QUICK TAKE
My reading of the market scenario...
There is a lot of retail/new investor participation in the markets, which is propping up some stock prices in the absence of robust fundamentals. While the overall index movement seems orderly, there are individual stocks that are witnessing huge bouts of volatility. Significant money can be lost by investors if they do not have the requisite temperament and understanding. My view is that the coming period will see somewhat subdued returns compared to the past 12 months.
Biggest lessons from recent years...
While it is important to invest in quality companies, it is also important to be mindful of the valuations that we pay for the companies. In recent years, the markets have gone overboard in terms of paying for quality, and some mean reversion in this regard is currently happening.
2.Shridatta Bhandwaldar
Age: 43 YEARS | Experience: 16 YEARS
PROFILE
BHANDWALDAR PERSONALLY HANDLES and oversees a large clutch of funds across different categories, and these have all contributed to his overall performance, reflecting his superior execution capabilities in diverse arenas. The sharp uptick in the PSU pack has caught him off guard, but Bhandwaldar remains convinced that this is transitory. He insists that painting every PSU company with the same brush amid this spike is fraught with risk. His emphasis on businesses showing capital efficiency has made him steer clear of many of the high-flying PSU names. He has only selectively participated in areas where facts have changed on the ground. Amid a broader market bias towards value, Bhandwaldar’s distinct tilt towards growth style has put a lid on returns, but he is adamant this cycle too will turn. Yet, he is cognisant that not every growth-led business will do well. Earnings have to ultimately come through to justify hefty valuations.
QUICK TAKE
My reading of the market scenario...
We are structurally constructive and tactically cautious. The former view is driven by good earnings visibility and structural tailwinds. We have structural tailwinds supporting healthy earnings growth, yet above average valuations and excess exuberance in part of the market is keeping us cautious in the near term. Large caps look better than the broader market from a risk-adjusted perspective.
Biggest lessons from recent years...
- Do not ignore businesses at low valuations if facts are changing.
- Liquidity can create extended periods of valuation dislocations in illiquid securities.
- You must have conviction and flexibility at the same time in a rapidly changing economic landscape.
3.Vinay Paharia
PROFILE
PAHARIA HAS DONE stints across three fund houses in our study period. In all these years, he has stuck to the GARP (growth at a reasonable price) philosophy. His endeavour has been to set up a process-driven framework that transcends individuals. He was particularly instrumental in turning around Union AMC’s fund performance. Initially leveraging his intuitive capabilities, Paharia has refined his approach while learning from past mistakes. He acknowledges that the market is no longer guided by plain vanilla valuation multiples. He now looks at opportunities through the prism of fair value, which is an outcome of earnings growth, return on equity and risk, among others. While his quality-led approach worked like a charm for many years, the past few years have proven hostile. However, Paharia insists that the data backs his style and while the stock market acts like a voting machine in the short term, it remains a weighing machine in the long run.
QUICK TAKE
My reading of the market scenario...
- It’s an unprecedented market environment, where good quality and high growth companies have severely underperformed those with inferior characteristics.
- Stock prices follow earnings in the long term.
- Growth is now 'value’.
Biggest lessons from recent years...
- While the markets can be a voting machine in the short term, it’s a weighing machine in the long term.
- Markets can remain irrational longer than you can remain solvent.
- Everything is cyclical in the short term. Zoom out to glean structural trends.
4.Shreyash Devalkar
PROFILE
DEVALKAR’S GROWTH AND quality tilt has generated outsized returns for his funds, but the cycle has shifted out of favour in the past 2-3 years. The sharp uptick in the PSU space has been a drag on performance. Despite the underperformance in recent years, the fund manager scores high in our ranking due to the ability of his funds to contain downside and volatility well. His risk scores are among those of top five fund managers in our study. Amid the shift towards value, he has reevaluated his investing thesis wherever structural changes have been visible, but the broader focus on growth and quality remains. He has also re-oriented his portfolios to bring more consistency in returns. Among other changes, Devalkar has reduced cash positions in Axis Bluechip and Axis Small Cap. He holds firm that individual bets determine outcomes more than cash calls. Known for running concentrated strategies earlier, he has cut exposure to the top 10 holdings in a few funds, ushering some granularity in portfolio composition.
My reading of the market scenario...
QUICK TAKE
This year could see bouts of consolidation ahead of general elections as market valuations are relatively expensive. Over a long period, equity market returns have tracked nominal GDP growth. Market corrections are healthy and a good opportunity for people to remain invested or add to their investments.
Biggest lessons from recent years...
Markets continue to surprise and throw new challenges at investors. It tests conviction and teaches one to be patient with companies that are in line with the core philosophy of investing. At the same time, in a dynamic world, we continue to re-assess the thesis in the companies we own, as well as in potential ideas.
5.Manish Gunwani
PROFILE
GUNWANI IS ANOTHER fund manager who has sharpened his investing skills over stints across multiple fund houses. Known for turning around performance in his earlier stint at Nippon India Growth, Gunwani has improved the return profile of Bandhan AMC equity funds. Initially plying a purely micro-focused approach, he now lets macro indicators show the path in managing funds. Understanding big shifts in policy direction is now a cornerstone of his philosophy. More than helping unearth ideas, he sees his role as that of shaping portfolio construction, aligning bets with macro policy. Setting up right processes and culture in his teams is a key focus area. Gunwani consciously runs a higher portfolio churn. He feels that greater agility is needed in current times, when pricing efficiency has increased so much that discounting for the next 4-5 years takes place in six months. He also avoids any strong style bias in his funds, which has known to kill funds amid big shifts in macros.
QUICK TAKE
My reading of the market scenario...
While valuations are not cheap, both global and domestic factors are currently positive for equities. Globally, interest rates seem to have peaked, and growth is better than expectations. On the domestic side, high GDP growth, macro stability and attractive currency fundamentals are big positives.
Biggest lessons from recent years...
You need a big and experienced team to outperform the broader indices as the choice of stocks has gone up massively in the past decade. Also, the cycles of both styles and sectors have become shorter and, thus, it is important to be nimble in changing portfolios.
6.Neelesh Surana
PROFILE
FOR VETERAN FUND manager Surana, the past few years have been rather unusual. The reset of standard filters related to valuations and growth have been particularly jarring. He insists that this reset is overdone. Surana has used this market upheaval to fine-tune processes internally. His portfolio construct shuns any sector tilt, but he chooses to selectively rejig sector weights within the portfolio compared to the benchmark, to generate alpha. He is quick to admit errors of omission, where his funds missed out on opportunities or could not capitalise enough owing to early exit, and for being far too conservative in certain sectors. While he no longer manages the flagship large-cap fund, Surana helms Mirae Asset ELSS Tax Saver on his own, as well as Mirae Asset Large & Midcap (erstwhile Emerging Bluechip), along with Ankit Jain. After a long wait, the latter has recently re-opened gates for higher ticket-size SIP subscribers as its capacity to absorb flows has increased due to the expansion in its target market universe.
QUICK TAKE
My reading of the market scenario...
The Indian economy is arguably one of the most resilient amid global chaos. We are confident in India’s robust and sustainable factors driving secular growth, leading us to maintain a constructive outlook on equities. We suggest investors adopt a carefully balanced allocation towards equities, demonstrating a longterm commitment over the coming decades.
Biggest lessons from recent years...
Learning is an ongoing process, especially in stock-specific scenarios. This is primarily linked to 'errors of omission' where decisions involve either non-participation or premature selling. In many instances, these errors are associated with a conservative approach to valuing a business.
7.Harsha Upadhyaya
PROFILE
UPADHYAYA HAS HAD a long stint in Kotak AMC, where he has been instrumental in turning around performances of many funds. He reckons the market has changed colours a lot in recent years and is now driven more by momentum and liquidity. Earlier, positions could be built gradually over a period of time, but the market no longer leaves windows of opportunity open for long, necessitating swifter execution by fund managers. Yet, he has remained cautious in deploying sums and has made use of intermittent volatility to add positions. Upadhyaya prefers the middle ground, instead of fishing for either extreme of growth or value. So, his hunting ground comprises steady compounders while being mindful of valuations. A key pillar of his strategy is avoiding errors, as reflected in his superior risk scores. He strongly feels that this approach may go wrong in a few years when returns do not come through, but it will not bleed the funds.
QUICK TAKE
My reading of the market scenario...
The economic and corporate fundamentals remain quite strong. The corporate earnings trajectory is clearly on an uptrend. As valuations move up, we may witness more volatile moves than has been seen in recent times.
Biggest lessons from recent years...
We have always believed that holding excess cash in portfolios can be a double-edged sword. The swift turnaround witnessed during the Covid period reaffirmed that belief.
8.Rajat Chandak
PROFILE
THE BEST OF CHANDAK’S performance has come from his deft handling of ICICI Prudential Bluechip, which is reflected in lower volatility and a superior risk-adjusted ranking. He has now handed over its reins to another fund manager. Trained to always scout for quality over pure value in his bets, Chandak admits that the market shift towards the latter has proved disruptive. However, his continued preference for market share gainers as a hunting ground for alpha creation has helped his funds stay afloat amid the turmoil. Chandak insists on taking a 360 degree view of a business, involving discussions with its multiple stakeholders, to achieve comfort in its growth potential. He shuns any cash calls, insisting that stock-specific deviations yield alpha, while cash positions are a matter of plain luck. He prefers to stay invested as there are always pockets of opportunity in the market. He avoids big sector deviations, but is comfortable moving out of step with the index for individual bets.
QUICK TAKE
My reading of the market scenario...
The economy is favourably positioned for the next 3-5 years, thanks to the recent government policies and emphasis on infrastructure development. Additionally, we hold a positive outlook on large caps, considering their attractiveness in the current market scenario.
Biggest lessons from recent years...
Our economy is expanding, presenting a growth market with promising prospects. When the growth outlook improves cyclically for a company or sector, the potential returns often surpass the market average. These returns can be substantial, particularly when the initial valuations for such entities were undervalued.
9.Niket Shah
PROFILE
WITH ITS COMPACT portfolio, Motilal Oswal AMC’s mid-cap offering sets itself apart from its peers that seek safety in diversification. Shah sees no vulnerability in running a highly concentrated portfolio. To earn a disproportionate return, he insists one needs to have the vision to see ahead 3-5 years, the conviction to buy when armed with the information, and the patience to see the story play out. He ensures that the risk-reward remains in his favour with an unwavering focus on high-quality franchises, where the upside is materially higher, and the downside is low. Even though the market conditions have not favoured this style in recent years, Shah has navigated the storm by timing his entry in pockets of growth stocks and sectors that offered valuation comfort. After an initial struggle with his flagship mid-cap fund, Shah used last year’s mid-cap rally to boost performance and beat peers. He has also engineered a turnaround in the struggling Motilal Oswal Flexi Cap fund in a short span of time.
QUICK TAKE
My reading of the market scenario...
Our view is that we should see some consolidation in the markets going forward, primarily due to expensive valuations. Given the valuation dichotomy, we will see more correction in mid caps than in large caps this year.
Biggest lessons from recent years...
One needs to get a growth insight on companies much faster as cycles have been much shorter and quicker. Conversely, it’s important to quickly move out of sectors where valuations have moved up sharply or where earnings downgrades start.
10.R. Srinivasan
PROFILE
AMONG THE FUNDS he currently manages, Srinivasan has steered SBI Small Cap and SBI Focused Equity for the longest time. In the small-cap space, he tends to focus on lesser known or beaten down businesses. He attempts to capture the sustainability of growth and transition of small-sized companies into mid-sized or larger companies. He remains very guarded about inflows to this fund given the capacity constraints in this space. Deeply conscious of high valuations and froth, Srinivasan prefers to hold cash and miss the last mile of a bull rally. He runs a large-cap bias in SBI Focused Equity to ensure that concentration does not hurt the portfolio in a downturn. Both Small Cap and Focused Equity funds have seen recent underperformance, but have historically displayed a high ability to contain the down markets.
QUICK TAKE
My reading of the market scenario...
Our large-cap market timing model, which looks at earnings, valuation and sentiment, is underweight in equities. Within equities, we think the small-cap space is overheated.
Biggest lessons from recent years...
The momentum in value, especially in the PSU space, has caught me completely off guard. The bias towards quality and the compulsion in size is hurting the relative performance.
