Over the past few years, market sentiment has swung from infectious joy to biting hopelessness to renewed positivity. From queuing for cyclicals and rate sensitive scrips to obsessing about quality scrips, different themes have shaken investors during this period. In such a confounding scenario, a handful of equity fund managers have brightened their reputation as astute stock pickers.

These fund managers drowned out the market noise to build portfolios with high conviction bets and stayed the course to deliver high returns for investors. Their success, in no small measure, is also owed to the robust processes established at respective fund houses, in addition to the critical contribution of in-house research teams.

Many on this list have managed funds from the mid and small cap funds and have been helped by the quick increment in the segment. Others may have missed out owing to a lower presence in this space, despite being highly accomplished in running their mandates.

As the market situation gets better, some of the names in this year’s list could easily make way for others. But, whatever the market position, investors are likely to have a good experience with these capable fund managers.

Neelesh Surana

Neelesh Surana is the mutual fund manager at Mirae Asset Global Investments. The 45 year old has about 20 years of experience. He is a BE and a Masters of Business Administration (MBA) in Finance. The average AUM for Surana over the past 5 years is about Rs. 2,300 crores, while the 5 year asset weighted yield is more than 25 %.

Neelesh has been outperforming on a steady basis across two opposite mandates. This has led to him being considered as a smart stock selector. India Opportunities and Emerging Bluechip, two of the mutual funds managed by him, have performed very well to the envy of competitors right from the very beginning. It may also be kept in mind that both these mutual funds are still considered amongst those with the best risk-reward portfolios in their respective categories.

The thrill of the market with regards to mid cap stocks did create a challenging situation for the fund manager towards management of Emerging Bluechip mid cap fund. However, he was able to reduce the risk by selecting large mid cap stocks.

He has mentioned that even though he did not have to go deeper into the market cap ladder for scrips for alpha generation, the current market conditions did need him to focus more in the existing scrips. When lump sum influx was closed to the fund, it did prove to be a boon for the fund manager.

He was eventually able to better steer the delicate terrain of mid cap stocks. The sharp deviation across various sectors triggers the need for raised comprehension of individual industries and businesses and this is the place where the fund manager has shown his capacities as a very good fund manager.

Key learnings in recent years
Do not sell a good business early, avoid value traps, and concentrate on management quality. Getting the big scenario view on scalability of good business is also important.
How to navigate the current market environment
Irrespective of the market environment, our approach remains same: Strengthen primary research. We have a team-based approach, which is concentrated on scrips selection through intensive research.
Investing theme for the upcoming 3 to 5 years Consumer discretionary theme, subject to reasonable valuations is a compelling area. In the near term, low inflation, interest rates, pay commission increase and good monsoon should help better the demand. In the long term, structural drivers will be linked to favourable demographics, increasing per capita income and rise in urbanisation.
Top 3 stock picks
ICICI Bank
HDFC Bank
IndusInd Bank

Top 3 sector bets
Financial services: 28.3 %
Consumer cyclical: 15.4 %
Basic materials: 14.6 %

Funds Managed Fund size 3 year 5 Year
Mirae Asset Emerging Bluechip 5364 Cr 17.10 % 29.39 %
Mirae Asset India Opportunities 6123 Cr 11.10 % 19.83 %
Mirae Asset Tax Saver 790 Cr

R Janakiraman

Janakiraman Rengaraju is a mutual fund manager at Franklin Templeton Mutual Fund. The 45 year old has about 20 years of work experience. He is a BE and holds a PGDM degree. The average AUM for the fund manager for more than 5 years is about Rs. 7,350 crores, while the 5 year asset weighted is about 26 %.

Janakiraman majorly prefers investment in quality stocks. This principle is opposite of the present market sentiment which has been indifferent to quality businesses over the last couple of months. R Janakiraman strongly believes that the process of a bull market maturing is marked by a lot of liquidity, which afterwards results in an unworthy re rating of businesses with less than average quality.

The urge of keep a particular level of portfolio performance may lead fund managers to go for below par shares. However, the fund manager has kept his concentration on making sure that sub par scrips are kept out of the funds managed by him.

All his funds are typically made of companies that have good flow of cash, give high yield on capital, and have decreased capital intensity. He has also chosen for businesses that have gained from discretionary demand in the domestic markets.

QUICK TAKE
Key learnings in recent years
A steady investment framework helps identify businesses that are good looking to investors on the parameters of growth, quality and sustainability. Such a framework appears to be the most capable of giving good risk adjusted returns over a business cycle.
How to navigate the current market environment
The portfolio construction needs to make sure that valuation as well as quality of the portfolio businesses remains within acceptable range.
Investing theme for the next 3-5 years Benefits of the change in specialty chemicals’ global cost will continue. Growth in consumer discretionary demand will help auto, home improvement/appliances and financial services sectors.
Top 3 stock picks
Yes Bank
HDFC Bank
Finolex Cables
Top 3 sector bets
Financial services: 22.8 %
Industrials: 18.8 %
Consumer cyclical: 18.6 %

Funds Managed Fund size 3 year 5 Year
Franklin India Opportunities 694 Cr 7.54 % 17.89 %
Franklin India Prima 6806 Cr 12.64 % 25.01 %
Franklin India Smaller Companies 7497 Cr 15.11 % 29.17 %

 

Sohini Andani

Sohini Andani is a mutual fund manager at SBI Asset Management Company. The 46 year old has more than 21 years of work experience. She is a B.Com graduate and is a Chartered Accountant. The average AUM for the fund manager for more than 5 years is more than Rs. 4,800 crores, while the 5 year asset weighted yield is more than 22.50 %.

The fund manager is known for her steady and good performance and has earned her credibility with good handling of two different mandates, i.e. SBI Magnum Midcap and SBI Bluechip. The fund manager has openly accepted that the speed at which the market has risen was very astonishing for her.

She believes that the re-rating of valuations of various businesses occurred at such a fast pace due to the sudden increase in liquidity, while the fact still remained that the business fundamentals did not develop decently to justify such high ratings. She has been not willing to go for raised returns via payment of higher prices for overvalued scrips. This is what has led to underperformance of the scheme managed by her as relative to the market performance.

Despite the underperformance, she is not discouraged and continues to avoid investing in particular pockets during the bull run in the stock market as she knows that it would affect the near term yields of her scheme. She continues to maintain her concentration on assembling positions in present portfolio as and when it is possible. Her position has always been that it is only possible to profit from compounding by holding on to good stocks over longer time duration.

Additionally, a high corpus fund and the present market situation have caused her to focus more on detail when selecting scrips. If any incorrect decisions are reversed now, then it would have a huge impact on the returns of the funds as relative to the past when the size of the funds was not as large.

QUICK TAKE
Key learnings in recent years
Portfolio performance is as much driven by scrips one does not invest in as it is by the scrips one selects. Liquidity or lack of it, can impact valuations in unexpected ways. And, to profit from compounding, invest for the long term.
Navigating the current market
There is too much liquidity chasing scrips. Important to monitor liquidity, its continuation or otherwise, and factors that affect it. Concentrate on long term growth visibility, capital efficiency, relative valuations.
Investing theme for the upcoming 3 to 5 years Domestic production recovery and sectors impacted by the same would be interesting to look out for. This consists industrials, construction, cement, auto and services related to domestic production.
Top 3 stock picks
HDFC Bank
Larsen & Toubro
State Bank of India
Top 3 sector bets
Financial services: 32.0 %
Basic materials: 13.8 %
Consumer cyclical: 12.8 %

Funds Managed Fund size 3 year 5 Year
SBI Banking & Financial Services 439 Cr 13.22 %
SBI Bluechip 17869 Cr 8.74 % 17.05 %
SBI Magnum Mid Cap 4233 Cr 11.22 % 25.13 %

 

Chirag Setalvad

Chirag Setalvad is a mutual fund manager at HDFC Asset Managemet Company. The 43 year old manager has 20 years of work experience. His educational qualifications include B.Sc and Masters of Business Administration. The average AUM for Janakiraman for more than 5 years is more than Rs. 10,420 crores, while the 5-year asset-weighted yield is about 24.7 %.

He is famous in the mutual fund industry for his investment skills, a fact very well seen in the performance of the HDFC Mid cap mutual fund, which he has managed for about 10 years now.

If understanding the business of the company in which he invests is a top preference for the manager, paying a reasonable price for it is also similarly important for him. His eagerness in studying the company’s business even before getting into its financials has made him invest early on to some quality stocks.

QUICK TAKE
Key learnings in recent years
Investors get good returns for being patient. But if valuations become too expensive, they may give up medium term returns. Second, evade timing the market. Third, invest in firms capable of giving good returns in both good and bad economic conditions.
Navigating the current market
The manager is looking at sectors and companies facing temporary challenges which have brought their valuations to sensible levels. He expects to ride volatility by investing aggressively during meaningful corrections.
Investing theme for the upcoming 3 to 5 years. GST can shift market share from the unorganised to the organised sector. Reliance on infrastructure creation will also give up opportunities.
Top 3 stock picks
Tube Investments Of India
Voltas
Balkrishna Industries
Top 3 sector bets
Consumer cyclical: 25.4 %
Financial services: 18.8 %
Industrials: 17.2 %

Funds Managed Fund size 3 year 5 Year
HDFC LT Advantage 1635 Cr 11.26 % 17.49 %
HDFC Mid Cap Opportunities 20959 Cr 14.23 % 25.63 %
HDFC Small Cap 2152 Cr 19.79 %

Vinit Sambre

Vinit Sambre is a mutual fund manager at DSP Blackrock Asset Management Company. The 42 year old manager has more than 18 years of work experience. He is a B.Com graduate and is a Chartered Accountant. The average AUM for Sambre for more than 5 years is over Rs 3,650 crores, while the five year asset weighted yield is more than 28 %.

Over the last couple of years the fund manager has made good choices while selecting scrips and has taken the correct positions in a timely way, thereby making great returns during the bull run running in the mid and small caps market. The kind of patience shown by the fund manager when picking scrips, a regimen of high analysis, and the restraint to avoid low quality businesses while pursuing alpha has allowed his fund DSP Blackrock Micro Cap to have a good performance.

The fund manager did have to change his strategy when the market conditions changed quickly. The portfolio of the funds managed by him increased quickly due to heavy influx of money, thereby leading to concerns in building higher positions in similar scrips triggered by liquidity ceiling. As opportunities started to disappear, the fund manager had to turn to bigger businesses. New flow of money into the scheme was also stopped for some time so as to be able to meet these challenging concerns.

During this entire tenure, fund manager did not flicker from his basic investment principles and followed them. He witholded from investing in low quality companies while continuously doing evaluations of the present scrips and their positions. The rate of good returns given by the funds managed by him has decreased of late, but his capability to move around the scrips in the funds’ portfolios during trying times should renew the belief of investors.

QUICK TAKES
Key learnings in recent years
Money making looks as an easy game in a bull market, and risks appear less. But such a condition leads to making mistakes, unless proper discipline is maintained.
Navigating the current market
The fund manager is trying to ignore the market noise and stick to their main approach of looking at fundamentally strong companies with prospects to create value over the longer tenure.

Investing theme for the upcoming 3 to 5 years. Implementation of GST would be quite transformational for India with far reaching consequence for many businesses. Consumer oriented firms in the organised sector should do good in the upcoming 3 to 5 years. Also, given the wipe out the pharma companies have seen, value has started emerging here and the sector should create wealth over 3to 5 years.

Top 3 stock picks
SRF
Manappuram Finance
Finolex Cables
Top 3 sector bets
Basic materials: 26.7 %
Consumer cyclical: 26.2 %
Financial services: 16.9 %

Funds Managed Fund size 3 year 5 Year
DSP Blackrock Micro Cap 6890 Cr 17.29 % 32.9 %
DSP Blackrock Small & Midcap 5476 Cr 14.39 % 24.88 %

 

Prashant Jain

Prashant Jain, an industry veteran with work experience of 20 years, has been responsible for good performance of the HDFC Top 200 scheme for 12 years in a market where fund managers have changed jobs in the last 2 years. The fund manager was chief investment officer of the fund in Zurich India Mutual Fund, which was purchased by HDFC Mutual Fund in June 2003.

Good performance needs no trick. The expanding corpus of the scheme managed by fund manager tells his success story. He sees managing of funds with a larger corpus as an opportunity. Prashant Jain said that one has to look at the size of funds in relation to the market cap. The largest mutual fund in the country is less than 0.2 % of India’s overall market cap. Besides, an approach to investment that looks at the long tenure give size a smaller handicap. Schemes managed by him have a good exposure to large cap stocks, which are very liquid. Even the mid caps in the portfolio show good quality and, according to him, they have reasonable liquidity even in poor markets.

The fund manager’s investment philosophy is concentrated on good companies and sustainable businesses. To manage risks, funds must effectively diversify their portfolios. He said that they do not want to overpay even for quality and growing businesses. The scheme has a very long track record, a large retail base and no concentration of ownership. Equity markets, in his opinion, are fairly valued at present. The returns over a medium to long tenure should, therefore, be in line with the earnings growth, which is of the order of 15 to 20 % per annum. He said that it will be his fund’s attempt to outperform the markets over the medium to long tenure.

  • Designation Executive Director & CIO
  • Experience 20 years
  • Investing philosophy Buying companies with a long-term horizon
Fund Managed Fund size 3 year 5 Year
HDFC Top 200 15821 Cr 7.29 % 14.26 %

 

Harsha Upadhyaya

Unless an investor looks out the investment landscape and pinpoint on the sectors that are assured to grow faster than the economy, he might not be able to get good returns. The fund manager is familiar of this and is forever on the lookout for sectors that are going to do good in the capital markets in a few years tenure. He selects the comparatively undervalued scrips within those segments.

The UTI Opportunity Fund is a sector rotation fund by nature, but this mutual fund manager, a mechanical engineer and a MBA from IIM Lucknow, believes that there are about 5 to 6 sectors that constitute about 60 to 70 % of the scheme’s portfolio. Once he pinpoints on a sector, he selects the scrips using a bottom up strategy within those sectors.

He said that despite being an opportunity fund, the team does not look only at momentum. He further added that they do not believe in heavily churning the portfolio. Even now, some scrips in the portfolio have been there for more than 3 years. The fund manager gets into a sector or scrips only if he is satisfied about their fundamentals and growth. He also uses derivatives to some extent to hedge against volatility.

The fund manager has been looking for scrips that will give returns medium to long term. He said that if they are steady on performance, even if they slip on rankings, it does not matter. He does not believe in taking higher cash calls. In regular market conditions, they are okay with a cash position of up to 10 % of the mutual fund size. Even during 2008, when the market was going through a bad time, the cash calls were at reasonable levels.

Fund Managed Fund size 3 year 5 Year
UTI Opp Fund 4377 Cr 4.15 % 12.83 %

 

Swati Kulkarni

Swati Kulkarni firmly believes that various type of funds demand various investment strategies. Working with the UTI Mutual Fund for the last 17 years, Swati Kulkarni has been a fund manager since 2004. Prior to that, she was part of the fund management team and was actively working with analysing companies across sectors.

The fund manager managed mutual fund research, market research, product reviews and quantitative analysis as part of the research and planning team at Reliance Industries. Her last assignment was with Reliance Industries in its financial planning cell. She has Masters in Financial Management from University of Mumbai. She has also got the CFA degree conferred by The CFA Institute, US, and is a certified associate of The Indian Institute of Bankers (CAIIB).

The good performance of UTI Dividend Yield Fund could be assigned to investments in dividend yield scrips across sectors. The fund manager does not stop herself to the boundaries of sector allocation, rather, she selects high dividend yield scrips across sectors using bottom up strategies.

She does not mind sitting on cash when valuations are good, which helps in reducing downside risks. During 2008, when the market was facing a bad time, an allocation of 5 to 6 % to high dividend scrips worked in the scheme’s favour. Elaborating on her investing philosophy, Kulkarni said that she does not churn her portfolio frequently. Her average holding tenure is 2 years. Some scrips in her portfolio are held for even 4 to 5 years.

Fund Managed Fund size 3 year 5 Year
UTI Dividend Yield 2729 Cr 7.36 % 2.89 %

 

Ashish Kumar

When an investor needs someone to manage his money market instruments and collateralised borrowing and lending securities, he may not want to think beyond this fund manager. On the very important criteria of risk adjusted returns, the fund manager clearly performs better than his complements. His investment philosophy goes around providing steady returns with safety, security and liquidity to investors.

He said that they invest in debt securities that have been allocated investment grade ratings. They chose the duration according to their point of view for the market and the fund’s investment objective. He also added that his investment strategy focuses investments in securities that give steady returns at a lesser level of risk.

In 2008, when markets across the globe were undergoing liquidity problem and debt fund managers were trying to get an idea of the direction of interest rates, Fund Manager’s view on increasing bond prices was spot on. After the crisis in October 2008, governments around the world started pumping money into the system to make sure of liquidity.

And soon, government bond yields started to decrease from the high of 9.25 to 9.50 % to around 5 % by December end. Fund manager was able to capture most of the profits from that liquidity problem.

He thinks that the investment condition for debt instruments is strong now, but there are some headwinds, particularly due to the upward movement of interest rates. For the upcoming few months, although he is concentrating on the shorter end of the yield curve, he is also looking at good prices for his long duration bond funds.

Fund Managed Fund size 3 year 5 Year
LIC MF Floating Rate 2252 Cr 7.33 7.79

 

Deepak Agrawal

In volatile bond markets, managing both long and short term funds is hard. But, the fund manager has made it look a little easy. He has notched up spectacular risk adjusted returns in both types of funds by smartly managing volatility and risk. To his advantage, his run as a research analyst and his experience at dealing desk has helped him manage fixed income schemes, where even small price changes can heavily impact yields.

A commerce graduate and Company Secretary (CS), the first thing that this fund manager does before investing in a debt instrument is to consider its credit rating.

Though yields are lesser in higher rated paper, a healthy mix makes sure that a scheme’s overall portfolio is largely invested in safe paper. He said that in India, he has seen credit ratings move broadly in line with the economic cycle and, so, all agencies have done well. However, he has our own credit research team, which assesses debt investments independently.

The fund manager invests in a debt scheme after taking into account its objective. He also considers the interest rates, the scheme’s maturity profile, the instrument’s credit rating and its yield to maturity.

He feels that in volatile times, especially when interest rate fluctuations are fast, an investor has to make changes to the scheme’s maturity profile. In short term schemes, he further favours asset liability management over interest rate view. In long term schemes, the reverse is true, as one has to change the maturity profile of the scheme.

This fund manager has supported his schemes for an increase in rates, given the high inflation in the economy. That should bode well for his investors.

Fund Managed Fund size 3 year 5 Year
Kotak Floater ST 10806 Cr 7.49 % 8.16 %

 

Shobhit Mehrotra

With over 17 years of work experience in fixed income markets and at credit rating agencies, it is no surprise that this fund manager is high on the list of best bond fund managers. At HDFC Asset Management Company, he, along with his team, coordinates more than 10 debt funds.

The fund manager emphasises the significance of yield safety and liquidity before locking in on a bond. This strategy aids him in looking at returns while maintaining the right balance between yield, safety and liquidity.

He feels that volatile interest rates present challenges for coordinating both long and short term debt funds. However, his past work experience of weathering several such unstable times, with a clear concentration on his main investment philosophy and disciplined processes, makes him to take these challenges head on.

Before joining HDFC, he worked at Templeton Asset Management Company (India) as AVP and portfolio manager of Fixed Income. Before this, he worked with ICRA as a business analyst, and was a member of the organization’s Executive Rating Committee.

When it comes to investing, the fund manager depends on his own analysis. He says that a credit rating provided by any rating agency is only a point of view and is just one of the many inputs which go into making an investment decision.

He further added that they have their own research team, which verifies the underlying credit quality of each security they invest in. In the present scenario, he is optimistic about the bond market. He anticipates yields to go down in the medium term, in line with their view that both fiscal deficit and inflation would be lesser in the medium term.

Fund Managed Fund size 3 year 5 Year
HDFC FRIF LTP 1874 Cr 7.59 % 8.17 %

Conclusion:

Fund managers play a very important role in the performance of the funds. The way a fund manager picks stocks determines a lot on the risk he is willing to take. Moreover how frequently he / she churns the stocks also determines the return that the investor will get by investing in the mutual fund. So investors should also keep in mind the fund manager while selecting the fund because the strategy adopted by the fund managers vary a lot.

Happy investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.