Best large cap mutual fund managers 2020

ET Wealth together with Morningstar India has selected and ranked India's best equity mutual fund managers, across three categories, based on their five-year risk-adjusted returns. Here are the top 5 in the large-cap category who have created the most wealth for investors.These fund managers are only acutely aware of the frequent disruptions in recent years—on account of demonetisation, the introduction of GST, trade wars and more— and how these have reshaped business environment. So while the extent of the pandemic-led disruption has not been seen ever before, many had already equipped their portfolios to handle large-scale disturbances. Read on to know how the professionals have managed to put a smile on investors’ faces despite some trying times.1. Shreyash Devalkar 77945548Age: 41 years Education: B.E. (Chemical Engineering), Masters In Management Studies Experience: 15 yearsAxis Bluechip investments5-year asset weighted return: 12.4%Average 5-year AUM: Rs 4,859 crRisk adjusted returns: 0.5362Fund managed: Axis BluechipAUM (Rs cr): 15,945Annualised Returns (%)3-YEAR: 8.635-YEAR: 8.68How he has managed the fundAxis Bluechip Fund has been an outlier in the underwhelming large-cap category for the past few years. Superior downside protection has underpinned Shreyas Devalkar’s chart-topping performance, aided by a strict bias towards quality. This is reflected in a compact portfolio with a distinct tilt towards mega caps within the large-cap universe.Devalkar is conscious of the trend of consolidation towards market leaders and well-organised players within sectors. Despite earnings proving disappointing, select stocks have been rewarded for market share gains. While leaning towards quality, growth oriented businesses, Devalkar has made subtle changes in his preferences as the pecking order has got revised in the wake of the pandemicdriven disruption. His return profile has also been helped by the higher cash position in recent years—an outcome the fund manager attributes to the narrow participation in market uptick. Amid the increasing number of disruptions, he insists that investors need to be wary about rich valuations and narrowing moats within the large-cap segment.QUICK TAKEWhat the market tells meValuations have moved up across the board. The economy has been more resilient than expected since the lockdown started. Certain sectors have surprised on growth in recent months, like cement, while some sectors have gained on digitisation trends, and yet others have shown ability to do business even during lockdown, like IT. Some companies have shown superior cost management during tough times. Well organised companies gaining market share has also been observed. The market has acknowledged these trends and the rally has panned on stock specific level, accordingly.My fund is aligned for The fund currently is aligned to capture the growth of financially stronger companies taking over from weaker companies. The survival of the fittest and their ability to thrive amidst uncertainty will reflect in their earnings performance going forward. Companies gaining market share, superior business model, good management quality and good financial metrics (high FCF to PAT, high ROE), remains key criteria for stock picking.Promising investment theme for next 3-5 years Our philosophy remains quality and growth. We would stick to good quality companies. The pandemic has reshuffled the pecking order when it comes to the growth aspect. We are overweight on quality companies gaining market share in all sectors including IT, pharmaceutical, lenders, insurance, telecom, automobiles, cement, retail and consumers.Top sector bets and top stock picks 77945562Also read: Best equity mutual fund managers 2020: Ranking by ET-Wealth-Morningstar2. Neelesh Surana & Gaurav Mishra, Mirae Asset Global Investments 77945572Neelesh SuranaAge: 51 years Education: B.E.(Mechanical), MBA (Finance)Experience: 28 yearsGaurav MishraAge: 49 years Education: MBA, BA Economics (Hons)Experience: 24 yearsMirae Asset Large Cap investments5-year asset weighted return: 10.8%Average 5-year AUM: Rs 7,335 crRisk adjusted returns: 0.5106Fund managed: Mirae Asset Large CapAUM (Rs cr): 17,650Annualised Returns (%)3-YEAR: 3.625-YEAR: 8.00How they have managed the fundAfter steering Mirae Asset Large Cap Fund for over a decade, Surana handed over the reins to Misra last year. He continues to oversee investments even as Misra takes the wheel. The fund has transitioned smoothly to its large-cap mandate from its multi-cap avatar, with a clear large-cap bias even prior to re-categorisation. Surana has built an impeccable track record focusing on underlying business strengths with focus on limiting drawdowns. While acknowledging that larger companies weather turbulence better, they have dug deeper into the softer aspects like management vision. They have maintained faith in businesses witnessing nearterm impairment in earnings but with long-term earnings trajectory intact. This has allowed the fund to benefit from early moves into sectors like pharma even before the pandemic made it fashionable.QUICK TAKEWhat the market tells meMarkets have overcome the initial fear and in aggregate are valuing earnings a year and a half beyond the pandemic. Going forward expect the markets to ascertain the nature and quality of growth and earnings revival. There is a structural opportunity which India offers. In the interim, an additional policy/fiscal response can aid in taking the system activity to pre Covid levels and beyond. My fund is aligned for Fund is aligned to many structural opportunities through good businesses in categories ranging from consumer discretionary items (including automobiles) to financials (including insurance). The fund also has a representation of ideas which are still in the deep value zone.Promising investment theme for next 3-5 years The accelerated adoption of digital and platform models, post Covid, is an interesting theme. The convenience and productivity gains from this and the wider penetration of the internet will help. Winners would include existing companies which successfully leverage this and new plays on this theme.Top sector bets and top stock picks 779455873. Neelotpal Sahai, HSBC Mutual Fund 77945598Age: 52 years Education: B.Tech, PGDMExperience: 26 yearsHSBC Large Cap Equity investments5-year asset weighted return: 5.4%Average 5-year AUM: Rs 642 crRisk adjusted returns: 0.0843Fund managed: HSBC Large Cap EquityAUM (Rs cr): 611Annualised Returns (%)3-YEAR: 1.965-YEAR: 6.12How he has managed the fundSahai has gravitated towards dominant players within sectors for some time. The pace of disruptions has led to polarisation within sectors where the leaders are gaining market share at the cost of the weaker players. This trend will only accelerate going ahead with profit pool migrating towards the dominant players, reckons Sahai. The pandemic-led disruption has forced Sahai to shift his portfolio stance. With no clarity on trend, he has resorted to moderating the active positions in his portfolio. While he was positive on pro-cyclicals before Covid, he is now overweight on healthcare, telecom and consumer discretionary. His preference is for companies with strong balance sheets and earnings resilience. The rollercoaster journey with the market has reinforced his belief that timing the market is futile and that it is best to remain invested throughout.QUICK TAKEWhat the market tells me The market is pricing in a scenario that the worst economic impact of the lockdown is behind us. The market is also making a distinction between sectors and industries minimally impacted and those facing major impact. It is distinguishing between industries facing temporary disruption and those facing lasting impact.My fund is aligned for Our fund’s philosophy has been to invest in dominant businesses with scalable potential and reasonable valuations. We’ve seen a trend of profit pool consolidating with the dominant players. We believe the trend will accelerate. This has increased our resolve to be true to our philosophy. We are positively disposed towards companies that have higher earnings resilience and stronger balance sheet.Promising investment theme for next 3-5 years We believe the trend of polarisation of profits will accelerate and encompass more sectors. We would prefer to remain invested in dominant players in sectors and industries. Another promising theme is diversification of global supply chain. Specialty chemicals / pharma, electronics could be some of the beneficiaries.Top sector bets and top stock picks 779456164. Harish Krishnan, Kotak Mutual Fund 77945624Age: 40 years Education: CFA, PGDBM, B.TechExperience: 15 yearsKotak Bluechip investments5-year asset weighted return: 4.9%Average 5-year AUM: Rs 1,328 crRisk adjusted returns: 0.0545Fund managed: Kotak BluechipAUM (Rs cr): 1,627Annualised Returns (%)3-YEAR: 3.045-YEAR: 5.50How he has managed the fundHarish Krishnan says disruptions were at play even before the pandemic, which has exacerbated the trend. Amid the heightened uncertainty, he found sense focusing on supply side issues—companies showing discipline on costs, capacity creation and pricing power—which lends for greater visibility on growth.He has clung on to companies focusing on mind share and market share, stressing these will benefit more when demand recovers. He has stuck to lighter balance sheets with lean cost structures that can maintain higher margins. Expecting high casualty rates among businesses, Krishnan has leaned towards companies where demand can recover quickly and resilient businesses models like insurance, cards, gold retailing, gas utilities, among others. Having large underweight position in banking has also given his fund a leg up.QUICK TAKEWhat the market tells meIn a difficult business environment, companies focused on increasing customer relevance, improving mindshare and market share will see profit share zoom as demand normalises. Thus, the endeavour is to focus on companies that are agile and adaptive to a rapidly changing landscape.My fund is aligned for Focused on four sub-themes – companies focused on financial savings solutions, companies that will benefit as factories and workplaces open up, companies across a range of consumer segments that will see demand revival over the next 12-24 months, and companies that are present in global value chain.Promising investment theme for next 3-5 years Manufacturing. With competitive tax rates, completion of large infrastructure projects, shift away from China globally as supply chains look for alternates and key incentives being offered by government to move factories to India, it appears that manufacturing will be a key beneficiary, especially those focused on automation, consumables to factories, light engineering products etc.Top sector bets and top stock picks 779456325. Swati Kulkarni, UTI Mutual Fund 77945639Age: 54 years Education: B Com. MFM, CFA, CAIIB-I, Certificate Examination of IIB for the employees of UTIExperience: 27 yearsUTI Mastershare Unit investments5-year asset weighted return: 4.7%Average 5-year AUM: Rs 4,681 crRisk adjusted returns: 0.0468Fund managed: UTI Mastershare UnitAUM (Rs cr): 6,243Annualised Returns (%)3-YEAR: 2.965-YEAR: 4.99How she has managed the fundA steady hand at UTI MF for many years, Swati Kulkarni has always employed a safety first approach. Cash flow provides the guiding light for Kulkarni in stock picks, as she feels all other numbers and metrics can be distorted. She has kept faith in businesses supported by competitive advantages or entry barriers. She finds this reflects in superior financials in form of high RoE and low debt. Recognising that it is the nature of risk to spring nasty surprises now and then, she seeks comfort in avoiding any form of concentrated exposure.Kulkarni reckons there is no point in predicting earnings for this financial year and instead chooses to draw from the past of companies in uncertain times as it gives fair indication of execution capability. She was among the early movers into the pharma segment much before the sector rebounded sharply amid the pandemic.QUICK TAKEWhat the market tells me Rather than the futile exercise of predicting the market, focus on finding quality businesses and stay invested. It will continue to gyrate between extreme pessimism and optimism leaving those hoping to time the market perplexed.My fund is aligned for The fund is invested in companies with strong competitive franchise. It tends to take a structural approach to portfolio construction and avoids tactical bets. The focus on businesses with strong cash flow generation and high / improving ROCE shall help us to navigate the current heightened uncertainty.Promising investment theme for next 3-5 years There are multiple drivers going ahead and it will be interesting to watch how they unfold rather than confining to any theme. These include growing health and hygiene awareness, digital adaption and consumerism,. Also growing manufacturing as India aspires to become sourcing alternative to China, government’s focus on infrastructure, changing savings trends, automation, productivity gains, improving market reach for farmers, soil nutrition awareness etc.Top sector bets and top stock picks 77945662(Source: Mornigstar India)

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