Investors with long term investment horizon should not waste time with SIPs in large cap funds: Mirae Asset’s Swarup Mohanty

Historically the midcap stocks have generated about 3-5% of alpha over large-cap stocks so one can accumulate midcap funds via SIP and use lumpsum to invest in large cap

Priyanka Bharati Jul 17, 2019

Swarup anand mohanty CEO-MiraeAsset
After the launch of focused fund, Mirae Asset Mutual Fund has opened a midcap fund for subscription. The NFO will close on 22nd July 2019. We reached out to Swarup Mohanty, Chief Executive Officer at Mirae Asset Global Investments (India) Pvt. Ltd to explore more on the rationale behind launching two back to back NFOs and how the new fund will be managed.

Mohanty has several years of experience in the field of financial services. He is overall responsible for the India AMC. Previously, Mohanty served as the Head of Sales at the firm since July 2011 and was responsible for overall sales function. Prior to this, he served at Religare Asset management. Co Ltd. Previously, Mohanty served at Birla Sunlife Asset Management Co Ltd, Franklin Templeton AMC, Kotak Mahindra AMC, Tata Finance, and Arihant Credit Capital Ltd in sales function. Excerpts:

As per our last discussion, focused equity fund was to be the riskiest fund by Mirae. So, what made the fund house take this decision or change the view?

It isn’t a changed view. We always play to our strengths and take futuristic calls. We have a midcap fund management capacity and even though we don’t like speaking about the past, we have shown our midcap fund management capability with Emerging Bluechip Fund. Moving out of midcap space was a strategic call, which played out.

Now, we have a capability and also the approval from Sebi, therefore we have launched the midcap fund. And this would be the last offering from our side, for the year, in open-ended NFO space.

Is the correction that happened in the last year a primary reason for launching a midcap fund?

It has got nothing to do with the correction. We believe in doing what we are confident about doing and then building a track record. If you see our fund house growth, for the first 8 years we built a performance track record and the scale was built later. We intend to build a good fund house, not a big fund house. Coming back to the rationale for launching a midcap fund, we bring good stock picking ability and we also had the approval to launch, hence we added a midcap fund to our product basket.

What will be the fund’s strategy? How similar will it be to Emerging Blue-chip when it was run as a midcap fund?

The only important thing in managing equity funds is stock picking. When we managed Emerging Bluechip the market scenario was different which offered different opportunities. Now the scenario is different, so are the opportunities. We are known for building the best-diversified funds in the industry, this fund won’t be any different. We will handpick companies that offer the best risk-reward in this space.

What would be the criteria for stock picking? Would the portfolio have any sectoral bias?

We will use the bottom-up strategy for stock picking. While the fund does not have any sectoral mandate, I believe the portfolio may be inclined towards financial sector at the present moment.

What is the kind of alpha the fund can generate over a long-term horizon of five years and above over largecap funds or the index?

Historically the midcap stocks have generated about 3-5% of alpha over large-cap stocks. I think the trend will continue for at least a decade from here.

The focused fund collected almost Rs 1,000 crore during NFO? what is the expectation of this NFO?

Again, we don’t focus on building scale we focus on building a good fund. Focused fund garnered close to Rs 750 crore during the NFO period. We believe this fund will also record a similar number.

What according to you will be a better strategy 1) Lump Sum Investment in midcap fund and SIP in large-cap fund for five years or 2) Lump Sum Investment in largecap fund and SIP in midcap fund for 5 years.

If somebody has an investment horizon of over five years, he/she should not waste time with SIPs in large-cap funds. But depending on one’s risk appetite a person can allocate 50% assets to largecap and 50% midcap. Over a long-term horizon doing lump sum investments in large cap will benefit investors more than the SIP investments.

What is your view on the union budget 2019? Do you see big spending by the government which might have a multiplier effect on the economy?

This is the first time that we have a clear roadmap to growth laid down by the government. In her budget, finance minister clearly stated the path for becoming $5 trillion economy and the measures that would be taken by the government. I think if investors participate now with equities, they can be a part of this growth story.

What will be your advice to the retail investors at this point in time? How important is asset class diversification for an investor?

The retail investor can use the current economic scenario as an ideal entry point in the equity market. As I always say, there is a risk in equity investments but not investing is a bigger risk. The asset class diversification depends on one’s risk appetite and goals, there is no right equation for deciding the allocation across assets.

Also read:

‘The risk of not investing in equity is higher than the risk of investing in equity’: Swarup Mohanty, CEO, Mirae Asset

Priyanka Bharati

Priyanka Bharati is a senior personal finance analyst with RupeeIQ. She can be reached on [email protected]

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