Mirae’s flagship funds
- Mirae Asset India Opportunities Fund and Mirae Asset Emerging Bluechip Fund
have crossed Rs. 800 crore and Rs. 500 crore respectively. Gopal Agarwal, CIO,
Mirae Asset Global Investments talks to Cafemutual about how his team has built
a commendable track record.
Can you please take us through Mirae Asset MF's investment philosophy and style?
We believe there is no short cut for success. We have been consistent with our investment principles since inception of our funds.
Overall, our endeavor is to consistently beat the benchmark through superior stock picking. We have exhibited the consistency over various time frames in both equity funds. When we select stock, we follow QGARP approach “quality growth at a reasonable price”, so that we can reduce mistake from mis-selection. For example, we try to identify companies with sustainable competitiveness – this refers to companies with a competitive advantage in market share, business model, corporate governance and earnings growth.
We invest with a long term perspective – a long term perspective is needed when determining whether a company’s competitiveness is sustainable.
Mirae Asset assesses investment risks with expected returns. We believe in a team based approach in decision making – portfolios in accordance with our investment principles are created through extensive discussions and team members.
Our investment approach is based on sticking to basics of investing. It is combination of both top-down and bottom-up approaches. As our performance is benchmarked to broader indices, a top down approach based on outlook on a sector helps decide the sector weights. Stock selection within a sector is more bottom-up oriented driven by individual merit of business. We prefer growth oriented businesses – however, we would avoid chasing growth at high price. We believe that growth should be a subset of value.
Do you think a small corpus allows a fund manager to deliver better performance because of the flexibility to maneuver?
We run our fund as an absolute return fund which is independent of AUM. All smaller funds have not fared well. Similarly, all large size funds have not disappointed. It is the process, stock selection and risk management framework which works to generate consistent performance.
Mirae Asset India Opportunities Fund has a commendable track record. What worked in its favour?
Some binding principles to our investment approach are as follows:
· Focus on businesses which have sustainable competitive advantages, and high return ratios (E.g.: ROE, ROI etc.), and free cash generation. We prefer companies which are sector leaders
· A strong and clean management track record that has proven it can manage businesses in all economic cycles
· We seek companies which provide “margin of safety”, which mitigates underlying risks (related to business, liquidity and volatility which are very important for mid and small cap companies).
· We prefer companies with strong earnings growth & earnings visibility
Our head-equity and fund manager of the scheme Neelesh Surana has a focused approach and strictly adheres to these guiding principles to generate consistent superior performance.
Mirae Asset India Opportunities Fund has crossed Rs. 800 crore AUM. Do you think further inflows in this fund would hamper the performance of the scheme?
Mirae Asset India Opportunities Fund is a multi-cap fund with large cap bias. We run this fund as a mix of large cap (ranging 70%-85%) and midcap (ranging between 15-30%). It is a very well liquid portfolio with over 90% of holdings that can be sold off in 3 trading days. We can manage 5 times of the current assets without changing our portfolio.
In the current market environment, how are you going about managing Mirae Asset Global Commodity Stocks Fund?
In this environment, we are focusing on companies with superior volume growth, cost leadership and stronger balance sheet to tide over the storm.
Mirae Asset India China Consumption Fund underperformed its benchmark during 30th June 2011 - 30th June 2012 and 30th June 2012 - 30th June 2013. Which calls went wrong and how are you going about managing this fund at this juncture?
The fund has generated returns of CAGR 22.39% since inception and beaten the benchmark which generated CAGR of 20.64% (as on 8th December, 2014). The underperformance was due to sharp rupee depreciation.
Many fund managers are bullish on mid and small cap stocks. With mid and small cap stocks having rallied 81% and 62% respectively over the last one year; do you think there's still some steam left in these sectors?
The midcap and small cap stocks got battered in CY13 due to slowing growth and sharp rupee depreciation, which led to pockets of large valuation gaps. As macro conditions have stabilized, this valuation gap has been removed now with the sharp rally in mid cap stocks. Generally, midcap companies tend to outperform in improving macro environment and growth. We expect the outperformance to continue; however investors should have a long term horizon of 3 years and above.
Which sectors are you bullish on?
We are running a balanced portfolio between predictable growth oriented companies and policy benefiting companies. However, our approach is generally to avoid massively debt funded and poor cash flow businesses. In this environment of slower world growth, It is prudent to stick to quality businesses (which we are bullish on) in predictable growth sectors like consumer staples and consumer discretionary, auto ancillaries, early cycle industrials like abrasives, bearings, pharma, oil PSU, banks, paints and fertilizers, auto including auto ancillaries and cement. We also have certain exposure to exporters to benefit from strong growth recovery in USA, e-commerce (entire value chain), specialty chemicals and companies benefiting from severe pollution control measures in China.
In your career as a fund manager, what have been your greatest learnings?
Stick
to the basics of investing for sustainable wealth creation.
