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"The Indian mutual fund industry is still at its nascent stage, with a relatively much smaller number of players than globally, particularly as compared to mature markets like the US."

| 10/18/2012 9:00 PM Thursday

Nimesh Shah took up the baton of Managing Director & CEO at ICICI Prudential AMC in the year 2007. He has an experience of over 18 years in the banking and financial services domain. In an interview with Saikat Mitra, he shares his take on the Indian Mutual Fund industry and his views on the domestic and global economic conditions.

Can you describe your fund management philosophy for us? What strategies do you follow to deliver a sustainable performance?

The biggest advantage for us has been our investment process. We have always been fairly process oriented. We follow a model portfolio-based approach, where analysts give inputs to fund managers, who build model portfolios and review them once a month. Fund managers manage schemes based on these inputs. Analysts are measured for the documented advice that they give fund managers, which is captured in the systems. Fund managers are measured for performance vis-à-vis the benchmarks and relevant peers. This ensures a clear team-based approach rather than a ‘star fund manager’ approach, and is more scalable and sustainable.

Our other key advantage that has helped us do well is the purity of our product positioning. We believe that fund management becomes more efficient and benefits investors if the parameters of expectations are well defined. This means that an investor knows what to expect from a fund. So, ICICI Prudential Focused Blue Chip as a large-cap fund will only have a universe of top 100 stocks by market cap and will pick around 30 best ideas from this universe. It will not participate in small and mid-caps under any circumstances. ICICI Prudential Discovery Fund will be a value fund with a minimum 55 per cent of small and mid-caps in its portfolio, its average P/E should be at a discount to the Nifty average and it should underperform in momentum-driven markets.

The most significant edge that we have is our performance. At the end of the day, if we are able to demonstrate consistent performance, investors will continue to invest in our funds. As of September end, almost 100 per cent of our equity funds have beaten their benchmarks on a three-year basis. In the final analysis, investors will always invest in organisations that have demonstrated long-term commitment and consistency, which is where our focus is.

What is your take on the current overall macroeconomic scenario of India?

While the macroeconomic scenario is improving, it requires further improvement from the standpoint of imperative moderation in the fiscal and current account deficit and inflation, as well as an impetus to growth. Therefore, there is significant scope for the scenario to improve further. The recent progressive steps taken with regard to energy reforms, FDI, etc. have set the ball rolling, but would need to be supplemented by many more steps to aid the continuous improvement of economic indicators. Taxation on select goods along with a timely, well executed disinvestment plan, which are already on the government radar, will be crucial going forward.

 

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