‘The years in which value does well, we’ll take them in our stride’
Premium- If we think there are cases where we think products may become inappropriate for people, we might as well not launch them, says Chandresh Nigam, CEO, Axis Mutual Fund
Axis was and remains a quality-focused fund house, emphasized Chandresh Nigam, CEO, Axis Mutual Fund, in an interview to Mint. Nigam also believes that asset management companies (AMCs) are manufacturers and should cater to both hands-on investors and those who want products with built-in advice. He is also intrigued by investing themes such as blockchain but believes that funds centered on them should be well diversified. Edited excerpt.
Should AMCs be manufacturers of schemes or should they just provide guidance to investors, for example, by stopping inflows whenever markets are overvalued?
There are some customers who expect some kind of pointers. And there are some customers who just want to use your products, because they will run whatever portfolios, changes, etc. Take, for example, products which have got some built-in advice, let’s say, balanced advantage products, or a fund of fund (FoF) scheme. Somebody who’s coming in there obviously is looking for a product which has built-in advice.Then there are some people who are saying no, I don’t want your large-cap to become like a mid-cap, which anyway, now cannot happen. So you have to basically have products that cater to both kinds of investors. I don’t think that you should shutter a product just because you think valuations are high. If we think there are cases where we think products may become inappropriate for people, we might as well not launch them in the first place. There’s been a constant debate in narrow sector funds. And when the going is good, everybody just gets in. But nobody can give you guidance on when to get out. You can however shut a fund because of capacity issues. For instance, if it is too large for its target universe of stocks.
Is Axis AMC, too, associated with growth investing?
That’s the only thing we do. Even before we launched the first fund, we started out very clearly that we want to be a high quality focused fund house and with focus on growth. Basically, only 5-6% of stocks actually generate all the returns in a market.
Now it’s not on a year-on-year basis. But if you take let’s say 5 years, 10 years, 15 years, 20 years, and longer, then the percentage of companies that really build or create wealth actually keeps coming down.
Now, having made that call also, it is true that there will be years when the value does well. What is this so-called value, I’m not getting into that. But let’s say lower quality may do much better. We’re happy to kind of take it in stride, because yes, it will happen. The other thing is I think we’ve seen, all of us have much longer careers than what we’ve seen in the past. At the end of the day, if you take higher risk, it may work for you for a year or two, but it will never really last long. So we are absolutely comfortable with our style.
How should investors read into your launch of a ‘Value Fund’?
In the market, there is a thinking that there is something called growth and something called value. We don’t agree to this approach because very often cheap stocks are cheap for a very good reason. For us, value is ultimately about long-term value – that is, are we able to look at five years and say that this would be value? We basically said that we want to showcase our investing style from a value perspective. So you will find that even though there will be a difference in the portfolios, there is some commonality in thought to the existing quality portfolio. So, here also we are still espousing quality, with a little bit of a twist.
Ultimately, as a full-service house, it is our job to make sure that we have offerings that can work with different investor segments’ needs as long as we are convinced that we can manage them for the long term and in our unique style.
On the hybrid side, you recently converted one of your funds to a balanced advantage.
This fund was always called dynamic equity fund. So the philosophy of changing equity exposures in response to market conditions was always there. Now, the way it so happened is, it was called dynamic equity fund and people didn’t understand what it was. And while in some cases, we can be category creators here, like it or not, from our perspective, we are followers. So we said we’ll change the name. So while the product objective and construct remain broadly similar, we also used this opportunity to review our rebalancing strategy and models and made some tweaks to take into account extreme market movements—which are becoming more and more frequent.
There’s some excitement in the market surrounding new technologies like blockchain. And some AMCs have chosen to file for new feeders backing those themes. Is that the best route to approach these new technologies from an investor point of view? And are you hopeful that Sebi will raise the overseas limit across mutual funds?
To answer your second question first, I think Sebi understands. We are waiting for the RBI and a government decision on this.
The first question is what about stuff like blockchain. I think the theme is too narrow. Most people think of blockchain as cryptocurrency to start with, but obviously, it’s much beyond that. And I think some of the people who have filed for such funds have already shown that.
But what typically happens is people want to do these funds because the last six months or one year has been great. It’s quite possible the next five years are also great. But what we would prefer is that we should put some of these technologies together in a more diversified theme. Yes, there will be some companies that will do very well and some revenues will probably go to zero. Whenever we do it, we will link stuff like biotech or something around it so that it becomes a reasonably diversified area for the fund manager also too. If suppose something’s going wrong in blockchain, then the money can be allocated somewhere else.
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