Anup Maheshwari, EVP, Head – Equities & Corporate Strategy, DSP BlackRock Investment Managers shares his thoughts on the role of luck in investing, advice to budding fund managers and his outlook on markets..
Could you describe your investment process and philosophy…
We follow a combination of top-down and bottom-up approach. We don’t categorise ourselves as growth or value managers. We look at companies and see if they are priced correctly or not. We meet companies more often in their offices than in ours. We have analysts who track particular sectors and companies.
The process is fairly standard. We make sure that we keep proper notes and meet companies at regular intervals. We plug in all these inputs in our systems and evaluate the stock’s intrinsic value. On Wednesdays we are not accessible to outsiders. The entire fund management team sits together; we do research and run through our funds, make presentations, etc. It’s a ‘no-noise’ day.
You have been with DSP for fifteen years now. Does stability of a fund manager translate in better fund performance?
If you look at all the good performing funds in the market over a long period, it’s typically been a function of people being consistent. You may have a defined process but there is always a human element in fund management. If people move then these elements come into play. Consistency of people at least allows you to see the performance and style through various market trends.
How important is the role of luck in investing?
There’s a bit of it. There’ll be some events which will always be unpredictable. How your portfolio was positioned on 19 May, 2008 and on 21 May, 2008 is a matter of luck. You couldn’t have predicted what came out. I would call it an element of unknown which could work in your favour or against you. You can do certain amount of analysis about businesses. Any external event which influences the economics of business could be called as luck or bad luck.
How many funds do you think should a single fund manager ideally manage?
The manner in which you manage funds is important. Let’s take the case of Apoorva Shah who manages DSPBR Equity Fund, DSPBR Top 100 Equity Fund and DSPBR Small & Mid Cap Fund. DSPBR Equity Fund is a blend of DSPBR Top 100 and Small and Mid-cap Fund. So there’s some homogeneity in these funds. As long as there’s homogeneity in funds a fund manager can manage wide range of funds. But beyond a point it becomes difficult.
The biggest challenge is to make sure that the investment style remains broadly similar across all funds without it becoming dependent on a single individual. When you have multiple funds managers, the process is same but style is slightly different. So you have to moderate their styles and make sure they are operating with certain discipline.
How do you process the information overload coming from various sources?
You need to shut it out and stop talking to a lot of people. We try to tell people what we want to hear. If we are not getting those inputs then we make it difficult for them to access us. Very often we are told that our team is difficult to access. It’s actually good. I’ll be worried if we are fully accessible. That means we are not focusing on what we should really be doing.
Have you adopted any changes in your fund management style over the years?
The style has broadly remained the same though the processes have evolved. The big change was when BlackRock took over the Merrill Lynch’s mutual fund business. BlackRock brought in a lot of technology and processes in our systems. Now we have investment package called Green Package.
BlackRock is very focused on risk management and we also have a separate risk and quantitative analysis team here. In the last three to four years, we are managing our funds in a more institutional format.
Do you think diversification beyond Indian markets is necessary for the Indian investor?
I think it’s required but you can’t generalise it for all investors. A lot of people are still underweight on India itself. A lot of investors don’t understand Indian equities yet. A lot of Indian funds have been around for fifteen years now and have outperformed the index and yielded between 15% to 20% returns. Despite this, there’s a lot of scepticism among mutual fund investors.
Whether it’s India or abroad, investors should get their investment approach correct. Today a lot of sophisticated investors who have surplus capital are looking for diversification beyond India. Retail investors should currently look at diversification within asset classes like gold, equity and fixed income domestically.
Share with us some of the practices adopted by DSP from BlackRock..
We are using a packaged based investment analysis solution provided by BlackRock. We also follow a risk and quantitative analysis (RQA) process followed by our partner. There is a lot of interface with their team. We have a detailed meeting with RQA team in Hong Kong and London. BlackRock strongly believes local capabilities. There is a lot of communication with their fund managers. There are similar practices across the organisation, be it on the compliance side or marketing.
How do you see the recent government reforms pan out in the market?
It should have happened last year. Now we have certain confidence that the government will go ahead with the next phase of reforms. This will lead to improvement in investment climate and help blocked projects take off. More than FDI the biggest reform was diesel price hike. I think corporates had reached a point where they felt that the government was working against them. Now it looks like the government is working with them. That helps corporates plan better and helps markets perform better.
What developments are you keenly watching out for the next one year?
The biggest development that we are watching out is interest rate trend, inflation and currency. A downward interest rate trend works well for markets. There are a lot of unknowns. There could be a mid-term election. But we can’t plan for them.
How do you manage your own money? Do you take help of a financial advisor?
We have certain constraints. It is very difficult for us to invest directly. Most of my investments are through SIPs in our own funds. I do have a financial advisor.
Your advice to budding fund managers
This business is about discipline. This is not a flashy business. It’s not about getting overexcited and trying to pick stock movers in the least possible time. It’s about finding good and consistent businesses. This is a business where the less you do the better you perform. The way to do less is to find good businesses and stay with them. I don’t think we have reached a point where we are investing perfectly. We all make mistakes and fall into this ‘sentiment’ trap.
One book which you would recommend to all investment professionals?
You’ll keep learning from every book you read. You have to pick and choose things out of books and fit into your thought process. The one book which really influenced me is ‘The Warren Buffett Way’ authored by Robert Hagstorm.
