Ashu Suyash, CEO of L&T Mutual Fund says that the newly integrated AMC is trying to regain its market share across all channels.
How do you see the year 2013 for L&T AMC and the industry?
I expect 2013 to be agood year for the mutual fund industry. Both equities and fixed income should do well. Equity markets started on a strong note with markets already up (3.5% as on 21 Jan) and bond yields have fallen in anticipation of lower interest rates. Looking forward, equities are at an interesting point now with valuations fairly attractive and are likely to benefit further if the government continues to execute crucial reforms this year. However, the trend in industry net flows is not as great as investors continue to book profits in equity funds. This is one segment where contribution by retail investors is the highest but faces large redemptions.
We expect interest rates to be lowered in 2013 and as a result fixed income funds, particularly duration funds should offer attractive returns. Investors can benefit from capital appreciation in these funds. In fact, a prudent asset allocation approach would be the ideal way to invest in 2013.
As a newly integrated entity, we have a high quality business that combines best-in-class practices, a strong domestic brand, comprehensive product range, market knowledge and a proven performance track record. We hope to gain market share across equity and debt this year on the back of strong distributor and customer engagement and continuity of robust investment performance.
How would you articulate the investment philosophy of L & T MF?
L&T Mutual Fund’s investment process is robust and based on GEM. This comprises three stages – Idea Generation (G), Evaluation of Companies (E) and Portfolio Manufacturing and Monitoring (M). Our analysts and portfolio managers actively look for new ideas which could come from sources such as investment team meetings, external research, meetings with company management/competitors/ suppliers, industry experts, regulators, etc. These ideas are then filtered using various filters such as liquidity, market capitalisation, ownership, etc. to shortlist investable companies which are thoroughly evaluated based on their profitability and attractiveness of business, competitive positioning, balance sheet strength, management track record, corporate governance and valuations.
Fund managers take all these inputs into consideration and make a decision to include or not include the stock in the portfolio and have the overall responsibility of their portfolios. The stocks bought in the portfolio are reviewed periodically and the fund manager may decide to exit a stock on achieving the price target or for other reasons such as weakening business prospects or if he finds better investment opportunity elsewhere. The portfolios are monitored continuously to ensure that they are positioned to meet their investment objectives. Investment Committee meetings are held on a regular basis to discuss the processes, recommendation and overall risk ratios.
This process underpins fixed income as well where the emphasis is on generating ideas through multiple sources of alpha such as duration, issuer / security selection and shape and slope of the yield curve. Our fixed income process is a combination of top down macro approach and bottom up issuer selection. In the top down approach, the team assesses the macroeconomic environment and market opportunities thereon.
Fundamental credit analysis is at the core of our process. The credit analysts carry out research of the issuers’ overall creditworthiness, which includes: reviewing its business model, liquidity risk and evaluating its cash flows and return on capital. The fixed income team meets regularly every week and on a monthly basis to discuss broad themes in the market and review the issues / strategies in the portfolio. The portfolios are monitored continuously to ensure that they are positioned to meet their investment objectives.
What are your priorities at L&T Mutual Fund?
Our vision is “Creating prosperity for our investors, partners and stakeholders by delivering consistent long term investment performance, by being a value provider of investment solutions and quality service". Towards that end, our key priorities for this year are regaining market share with the banking channel, becoming the preferred partner for national distributors and IFAs, focus on investor education especially in the B-15 locations, growing our SIP book, ensuring high quality service and relentless pursuit of strong risk adjusted investment performance.
