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  • MF News From reading India’s history to reading company reports, Rajat is a history buff and fund manager combined into one

    From reading India’s history to reading company reports, Rajat is a history buff and fund manager combined into one

    “The harder I work, the luckier I get”, says Rajat Jain, CIO, Principal MF in Coffee with Cafemutual
    Shreeta Rege Dec 20, 2018

    Even before travel became a popular hobby, Rajat and his friends could be found roaming amongst the beautiful Ellora caves marvelling at the architecture or gazing mesmerised at the beautiful stone carvings in Odisha. History and travel or more accurately historical travel always held an allure for Rajat. As a kid, he dreamt of working in the travel industry but the travel business was not organised at that point in time.

    As was typical of the time, he became an engineer. However, he soon realised that his interests lay somewhere else. This prompted him to enter the financial services sector. Over the years, he has grown to love fund management. He especially, appreciates the fact that as a fund manager he gets the opportunity to interact with company managements, regulators, fund managers, distributors – a wide array of learned people.

    After 29 years in investment management, he does not take stock picking decisions. He enjoys a supervisory role. His day typically involves catching up on global and local news, meeting with different people, analysing fund positions and performance.

    Fund management style

    Rajat shares that at Principal they are not too fixated on adopting a particular style of investing (growth, value). Rather they are bottom up portfolio constructors. They select companies having positive earnings growth and the potential to positively surprise markets. The team further shortlists companies run by good management, having robust capital utilisation practices and attractive relative valuation. All in all, they like to keep the stock selection process uncomplicated. Even so, the team pays equal attention to stock selection and portfolio construction. Rajat firmly believes that gains due to smart stock selection can be lost due to poor portfolio construction. So, the Principal team diligently evaluates and implements stock and sector limits. The aim is to ensure minimum fall in portfolio value in case of any unforeseen event.

    Though at the face of it, having risk limits on stocks and sectors might look rigid, the team has a significant amount of room to take active calls. Rajat shares that their schemes can take 40-45% exposure away from the benchmark.

    Overall, his team’s focus on earnings ensures long-term stock positions with the average holding period for a scrip in the portfolio being 1 1/2 to 2 years.

    Equity market risks in the coming year and what now.

    Rajat believes that the recent correction has brought a level of sanity back in markets. Talking about the corporate earnings disappointment in the last few years he shares that the post the correction the valuations have started looking reasonable again. Furthermore, earnings, which in fact determine the ‘reasonability of PE’, are expected to grow. Strong companies in the banking, auto and cement sector are especially poised to see this growth in earnings.

    However, he cautions against macro risks. He believes geo-political risk as the most severe one for the markets now. According to Rajat, India still is not an independent asset class. Flows to India are a subset of overall emerging market flows. Thus, if the emerging market flows falter, India will also be affected adversely. At this juncture, the key geo-political risks include fear over trade war between US & China and direction of crude prices. While these are medium term risks, on a short-term basis state election results will bring some volatility in the markets. Rajat sees any sharp temporary correction in the market as an investment opportunity. He shares that many good quality mid cap companies are available at attractive valuations post the market correction. Thus, investors can look at these corrections as accumulation opportunities. 

    With macros and corporate earnings falling in place, he expects the markets to deliver low double–digit returns over the next 3 to 4 years.

     The distributors and we both are working for investors 

    Rajat feels that in the asset management space, fund performance speaks for itself, as the aim of both distributors and fund managers is to create good returns for the investors. However, the main challenge in this endeavour is that there is continuous stream of new information pouring in every day. The trick is to pick the important information and remain agile in terms of investment decision. He closes the chat by sharing a favourite quote that he read a few years ago, "The harder I work, the luckier I get". While there is an element of luck in fund performance, you need to have a good grasp of the investment landscape so that you can grab the right opportunity when the lucky break comes, he adds. 

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