Why int'l equity is relevant for Indian investors

For investors who have taken exposure to international equity instruments, the depreciating rupee has added to the good returns, Ajit Menon CEO, PGIM India Mutual Fund tells ET Wealth.After PGIM India’s 100% acquisition of DHFL Pramerica, what have been the immediate focus areas for the fund house?The most important focus area was restoring confidence of our clients and advisers. We never wavered from the quality of our processes and transparently communicated the steps being taken to all stakeholders. In late 2019, we began building on the PGIM India brand and the focus area was familiarising partners and clients with the strengths that PGIM’s global experience brought to the table. Alongside, we also started filling in relevant product gaps.Our internal teamwork was forged in a crisis and the talent we built early on was what helped us turn around relatively quickly. Our domestic equity platform led the charge and Srinivas Rao Ravuri who joined us as CIO in 2019 along with his team played a significant role in delivering on our commitment to consistent performance. The strength of our process and our skills continue to give us momentum. Our focus now is to maintain consistency of the investment platform and bring further relevant products and solutions to the market. We recently received approval to launch our small-cap fund which is scheduled for 9 July.Being among the few pure foreign-owned AMCs in the country, how do you see the industry evolving?Our parent is the tenth-largest asset manager in the world and in a sense is currently the largest international brand present in India. The industry has come a long way and the potential growth opportunity is well known. Structurally, more investors are migrating to financial assets. The low-interest-rate scenario is also prompting savers and investors to look beyond traditional products. The Indian investor is more mature today and awareness levels have risen exponentially. Regulations continue to evolve and Sebi has put in place stringent checks and balances to protect investors. Digital enablement across the industry is another force multiplier. Distribution has matured too and every business model in international markets is present in India today. All these factors create an enabling environment for the industry to reach new heights.You launched a balanced advantage fund, a category which generates lot of interest but also seems to confuse investors. How are you positioning this fund?We believe this category has the scope to be a flagship category for the industry in times ahead as we see more and more investors adopting mutual funds. The basic design and purpose of this category is to serve as a fill it-shut it- forget it kind of approach to asset allocation. The only difference would be in the factors that each fund uses to fulfil that common goal. It is also this multiplicity of factors used that gives rise to some confusion when it comes to selecting an option. There is no good or bad strategy. What we need to focus on is that the objective is to provide a better risk-adjusted return, provide better downside protection. We have therefore positioned our balanced advantage fund by focusing on these aspects while emphasizing that our endeavour is to provide a reasonably consistent return over the risk-free rate in the long term.Has there been any realignment of strategy in debt funds after taking a bad hit on large exposure to DHFL bonds?Our exposure to DHFL bonds was all through even tighter than the prudential norms for single and group issuer exposure limits. We continue to focus on higher-rated issuers/groups, with a long and stable history of credit ratings and no delays /defaults combined with strong corporate governance and management quality.We avoid issuers/groups that are overleveraged and rely excessively on refinancing as a primary source of debt repayments. We have strengthened our internal rating model and filters for issuer screening and surveillance which helps in identifying early warnings.Your hybrid fund became the first in its category to include foreign equity exposure. The industry cap for foreign exposure was also hiked. What is your take on this space?In the aggressive hybrid category, we are currently the only fund with exposure to international equities. The international equity space itself has become increasingly relevant to Indian investors. This is because there are enough stocks, sectors and themes that are not represented in the Indian markets as yet, and definitely not at scale. Additionally, an investor also takes an exposure to currency. This can go both ways but so far a depreciating rupee has helped add to the returns. There is familiarity with global companies that are at the forefront in their respective sectors and many services are part of our daily lives. We, therefore, think that the increase in the cap made available by the regulator is a proactive step in the right direction. Introducing the PGIM Jennison Global Equity fund to Indian investors was timely.What is your assessment of the market buoyancy given the fragile economy?Some pockets of the economy are under considerable stress but overall economy is definitely not fragile. The recent crisis and subsequent bounce back in economic activity, overall growth rates across sectors clearly highlight the attractiveness of Indian markets. Same is also vindicated in record forex reserves lead by steady FDI in FII investments. Sharp increase in retail participation in stock market is also aiding market buoyancy.

from Economic Times https://ift.tt/3dI7vZb