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Bottom-up approach pays dividends

A contrarian call also helped when the RBI shifted its focus and increased the cost of funds to stem the rupee's fall


BS  |  Mumbai 

Volatility is the new normal for Indian equities

Sachin Padwal-Desai says he would have been a software engineer if he wasn’t a fund manager. His partner Umesh Sharma probably would have been a chartered accountant.

Instead of crunching code or calculating taxes, the two manage over Rs 11,000 crore in assets at Franklin Templeton Investments, and importantly, stand out in their job. The two fund managers have managed to beat their benchmark indices in the last one year in four out of the five funds that they manage.testing.. we are here....

The widest outperformance is in the ‘Templeton India Income Builder Account’ or Templeton India IBA, a scheme that focuses on corporate and public sector debt opportunities, which has outperformed the Crisil Composite Bond Fund by over three percentage points.

Their ability to beat the market is largely driven by a focus on bottom-up analysis, according to them.

“Whilst most of the industry only focuses on top-down and active management of duration, we focus on finding mispriced securities across the yield curve (in line with the fund’s objectives). The latter is based on a thorough bottom-up analysis of a company along with independent in-depth credit research. We believe such an approach helps us in being flexible in identifying opportunities irrespective of the stage of the interest rate cycle,” they said in an emailed response to Business Standard queries.

This doesn’t mean that they completely ignore the macro-picture either. For their top-down analysis, they rely on inputs from corporate sources in addition to watching the traditional fundamental parameters.

“Apart from the macro parameters, we also interact with company managements and external agencies to validate our hypothesis about the economic environment. This helps us in forming independent views about the monetary policy direction. For example, notwithstanding the rate cuts earlier in the year, we remained quite cautious about the environment due to our concerns about CAD (Current Account Deficit) and rupee,” they said.

The fund house says that it follows a team-based investing style that reflects the inputs of all individuals. The final decision is taken, following a discussion and exchange of ideas and perspectives between the portfolio managers and the credit research team. They believe that having more than one manager helps provide continuity as well as a ‘more wholesome approach to investing.’

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First Published: Mon, September 14 2020. 18:30 IST