India's top PMS fund managers have consistently outperformed the market. Their secret? Among other strategies, it involves a combination of analysing fundamentals, stock selection, and strategic risk control, all aimed at maximising returns.

PMS Bazaar conducted its second edition of the Dubai Alternative Investment Summit (DAIS) on February 17, 2024. As part of this event, the company invited various industry experts to share their insights on the Indian alternative industry. 

Among the various topics of discussion was a panel that focused on how some of India’s finest money portfolio managers generated top-notch returns over the years. In this panel, the discussion was focused on the fundamentals of the companies, usage of behavioural finance and employing various strategies such as market-neutral arbitrage and multi-factor investing.

The topic of the panel discussion was: The Secret of Superior Returns from India's Top Performing Portfolio Managers

Panel experts were:

Anirudh Garg, Fund Manager, Invasset; Bhavik Thakkar, CEO, Abans Investment Managers; Bhavin Shah, Founder & CIO, Sameeksha Capital; and Vipul Prasad, Founder & CEO of Magadh Capital.

Moderator: Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services.

Krishnan Ramachandran started by highlighting how India has transformed in the last 10 years and how key growth and macroeconomic metrics were looking up. He added that money managers have delivered well over the past three to five years, and wanted to know how the markets should be approached in the next five years.

Vipul Prasad said the focus would continue to be on arriving at the fair value of businesses, understanding key business variables and forecasting the cashflows that companies can generate. He added that assigning probabilities to scenarios that could play out was another key step. Using behavioural finance reduces biases and mistakes in stock selection, he noted.

What helps with the investment opportunities?

Bhavin Shah said the economic growth in the country over the long term would throw up many investment opportunities. Even in a depressed market and economic conditions in the early part of the previous decades, there were attractive pockets, he observed.

Tracing the gyrating, but upward-moving markets from 2020, Bhavik Thakkar said that’s when a fund manager’s asset-picking skill would come to the fore. He went on to highlight the advantages of a market-neutral arbitrage strategy and also momentum investing.

Anirudh Garg was then asked about balancing growth and value factors in investing. He said that a multi-factor approach combining value, growth, quality and so on would help depending on the market conditions – bearish, bullish or sideways. After good returns are generated over a period of time, preservation is important and cash calls can be taken to ensure capital protection in overexuberant markets.

Moving to the mid and small-cap story, Prasad then went on to state that the index was not representative of the action in individual stocks in terms of valuations, growth potential and so on. He stressed against relying solely on price multiples and emphasised careful earnings growth forecasts.

Highlighting the need for being prudent in stock selection, Shah emphasised the importance of using both qualitative and quantitative factors.

Thakkar then explained how structured products were actually ‘predictable passives.’ Linking the returns of a market-linked debenture innovatively to an index such as the Nifty, particularly at depressed market levels, gives a certain degree of certainty to returns. This could be done with g-secs as well, he said.

 Watch and listen to the entire panel discussion for in-depth insights on how to build a portfolio that generates superior returns 

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