X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
"Fund managers no longer have the luxury of investing for the long term" - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • A  A  A
  • Jan 29, 2001

    "Fund managers no longer have the luxury of investing for the long term"

    Sunil Joseph is the President and Director of Dundee Investment Management and Research and a Director of other Dundee group companies including Dundee Bancorp Private Limited. Dundee Capital Markets Private Limited and Dundee Precious Metals Private Limited.

    He has worked in private corporate and merchant banking for 14 years and has been with Dundee for 5 years. He is an MBA from the Australian Graduate School of Management and a BA (Honours) from St. Stephens, University of Delhi.

    In an interview to personalfn.com, he aired his views on the economy, the state of the equity and fixed income markets and Dundee Mutual Fundís investment strategy.

    PFN: What is your view on the economic scenario?

    Mr. Joseph: Lets begin with what happened way back in 1998. Then, with the foreign institutional investors (FIIs) and foreign direct investment (FDI) we had thought the country would be able to take care of its current account deficit. But that did not happen, which is why we had the Resurgent India Bond (RIB). When that still did not happen we had the India Millennium Deposit (IMD). All these events have had an impact on country allocation. Perception of risk has increased, which is why foreign investment inflows have not been up to the mark.

    With interest rates coming down we have to see where the risk-return allocation has been globally. While our current account deficit is under control with the IMD inflows and the exports going up and petrol prices coming down, industrially however, we are witnessing a slowdown. Even our exports are IT-centric at the moment. IT (information technology) again is going through a transition period. In April and May 2000 we had valuation concerns and now we have worries that the revenue model overseas is not working anymore. There is still a strong link between the Indian and US markets, where we are still service oriented. Hopefully, export of gems, jewellery and invisibles may take a better shape next year.

    Now the second problem is if there is actually an economic slowdown, you canít predict it until the second quarter. Right now, we have an interest rate scenario, which is fairly relaxed. The government has been able to issue 15-year paper at lower rates. However if the budget has a large borrowing program this year, I do not see interest rates coming down.

    If the government wants to control fiscal deficit, it will have undertake some fiscal measures. Tinkering with the monetary policy will work in phases and is not a long-term measure.

    PFN: How do you find the markets now? And going forwardÖ

    Mr. Joseph: The markets have changed and no one looks for value anymore. Its a quarter-to-quarter momentum. So going forward if the quarter-to-quarter sentiment continues, and I think it will, you will find that youíll have to be more of a trader than a value investor. Accordingly your strategy will have to be shorter youíll have to be very aware, much more aware than people have been in the past. In December we may find software companies reporting lower billings because markets like the US donít work too much in December. So there is nothing wrong with the company fundamentally, but the sentiment could turn negative since its a quarter to quarter market. Going forward on the equity side, youíll have to be very vigilant and youíll have to focus on the companies and not on the stock market or the BSE Sensex and thatís been our philosophy because probably the Sensex has remained the same and people have made money. On the debt side, if the budget deficit is significantly large, we may see a rate hike and that means that portfolio managers will have to shorten their duration.

    PFN: What is your investment philosophy?

    Mr. Joseph: We look at sectors and then we look at companies within the sector. We look out for good defensive stocks, growth momentum stocks, value stocks and we narrow down to 2-3 stocks within the sector. We track 20 stocks maximum.

    PFN: Do you normally have a long-term view on stocks?

    Mr. Joseph: Because of the quarterly momentum trend in the markets currently, there have been times when we have exited a stock completely and re-entered it at lower levels. While the business (of the company) maybe very sound, but for that quarter or for that period the performance doesnít match the market sentiments. So we have rethink where we have to exit and where we have to re-enter.

    PFN: Do you believe these quarterly earnings and tracking is a good thing? Shouldnít a fund be taking at least a 2-3 year investment horizon?

    Mr. Joseph: You must understand that the Indian investor will never allow us a 2-3 year horizon. The investor and the mutual fund looks at it daily. If you are a portfolio manager you donít have that luxury anymore of investing for the long term. Its because you seen such a lot of wealth created in such a short period of time, and you have also seen a lot of wealth eroded in a short period of time. If you give a growth fund a 2-3 year investment horizon, you may get a 16-17% compounded return. If you take a period lower than that, than you would be disappointed with the fundís performance. That is one reason why balanced funds have done so very well and have picked up.

    PFN: Is tracking the NAVs daily a good development for the industry? It puts a lot of pressure on the fund manager to deliver.

    Mr. Joseph: The manager should be under pressure to perform. I am not saying that you do should not do value investing. An individual investor doing value investing is justifiable. But I donít think the fund manager can afford, he just does not have that luxury in a mutual fund. Donít forget that stocks have fallen 70% (over the year) so you really have to be nimble if you want to cut losses.

    PFN: Do you advocate both investment styles, growth as well as value investing?

    Mr. Joseph: Yes. We follow both investment styles.

    PFN: What is your investment strategy for the fixed income market?

    Mr. Joseph: In January we have decided to go for long-dated paper. In the Sovereign Fund we have bought paper till even 2008. You have to understand it is different in a Sovereign Fund as compared to a gilt fund. In a gilt fund you have to go by liquidity in addition to the duration, because liquidity is a driving factor rather than the duration. In the liquidity fund we have 1-1.5 year paper except for 1 or 2 boosters.

    One thing I can say on liquidity during the year. Although I believe that interest rates could rise in the year, disinvestments will play a crucial role. I believe that disinvestments could well happen by July-August this year as the disinvestments department seems to be working overtime.

    PFN: Do you believe the US slowdown could have an adverse impact on the domestic IT sector?

    Mr. Joseph: You have to understand the slowdown in the US. Its more of a political problem (than an economic one). You raise interest rates, let a new government come to power. If you track historical data thatís what it implies. In any case, our IT expertise does not include making software products, rather, we are service providers and are placed at the lower end of the ladder. So I do not see us getting affected by a US slowdown for at least 2-3 years, and I feel that way very strongly.

    PFN: When you look at Dundee Mutual Fund, you find that it is a predominantly debt fund house. The only equity investments are in the tax saving fund and the balanced fund.

    Mr. Joseph: We have just got our growth fund approval. We started off with debt funds The truth is we thought convertibility would take place when Manmohan Singh was the finance minister (but it didnít really happen). We wanted the government to do then what its doing right now i.e. allowing ADRs investments. We started with proprietary money in equity. We were the first FII to invest in debt in this country. That was as far as proprietary cash was concerned. On the fund side, we decided to start with the low risk liquid, money market funds. To move up on the chain we started sovereign fund because the pension fund sector was getting deregulated and gilts were becoming the flavour of the day. We then moved on to corporate bond and PSU bonds to give it a retail flavour. After we decided to move into equity, which is why we launched the tax fund and balanced fund and now we will launch the growth fund.

    PFN: How big is Dundee Mutual Fund in terms of net assets?

    Mr. Joseph: Today we are Rs 2.3 bn (in net assets). Of this the liquidity fund is Rs 1 bn, corporate bond fund is about Rs 160-170 m, and the bond fund is about Rs 800 m, balanced fund is about Rs 200 m, gilt fund is about Rs 150 m and tax fund is about Rs 20 m.

    PFN: How positive are you about distribution of mutual funds through the NSE?

    Mr. Joseph: You see itís a t+5 and t+0 situation. So long as its t+5 I am a little pessimistic. Once thatís sorted out, it will be very good. You just canít beat an organized distribution network (like the NSE) in the long run. Moreover its unbiased.

    PFN: Do you believe that buying stocks/mutual funds over the Internet has a great future in our country?

    Mr. Joseph: It all depends on how comfortable people are doing all this on the Internet. Till now its been mostly brick and mortar, so we donít know if that mindset is going to change soon.

    PFN: Who are the persons who have influenced you the most?

    Mr. Joseph: My dad for setting the ethical standards for me. My immediate boss in Dundee, not just because he is my boss, but because I have learnt a lot from him.

     

     

    Equitymaster requests your view! Post a comment on ""Fund managers no longer have the luxury of investing for the long term"". Click here!

      
     

    More Views on News

    The Right Financial Advisor Is Around the Corner (Outside View)

    Mar 10, 2016

    An opportunity to find an impeccably trustworthy and competent financial guardian is in the offing.

    Why financial planning should be dull and boring (Mutual Fund Corner)

    Feb 29, 2016

    Most financial planners come out as whiz kids who throw around financial jargon. But financial planning can be actually easy, provided one follows a disciplined approach.

    What Are E-Wallets And How To Use Them (Mutual Fund Corner)

    Feb 12, 2016

    PersonalFN highlights the benefits of parking a portion of your expenses in e-wallets and using them efficiently.

    Is Consumption Boom Over In India? (Mutual Fund Corner)

    Feb 2, 2016

    Mutual funds take a bearish call on the FMCG sector. The sector has started playing out due to a combination of slower growth and expensive valuations.

    How to Find a Saint Amongst Sinners? (Mutual Fund Corner)

    Feb 1, 2016

    Ethical practices help build long lasting relationships, and healthy long-term business relationships are often mutually rewarding. But PersonalFN is of the view that the financial services industry in India seems to have forgotten this.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MARKET STATS