Big talk- TP Raman - Sundaram

BIG TALK T.P. RAMAN, SUNDARAM BNP Paribas Mutual Fund

‘Fund managers matter more in themes’

Sandeep Singh

Posted online: Tuesday , April 17, 2007 at 1447 IST
Updated: Wednesday, June 29, 2005 at 1257 hours IST -->

One of the issues facing fund houses is people. Fund managers, the all-important set of people who are a big reason for your investment to lead or lag, are few in number. With the number of fund houses and schemes growing by the day, fund managers moves are becoming more frequent. Recently, for instance, Sundaram BNP Paribas Mutual Fund lost the services of Anoop Bhaskar, who was an important reason for the fund house’s strong equities showing. Sundaram managing director T.P. Raman promises continuity, but also admits that individuality plays a greater role in specialised funds. In an interview to our correspondent, Raman touches on the touchy issue of fund manager churn and more.

Fund managers come and go. Recently, you lost Anoop Bhaskar, your driver on the equities side. Will it affect performance of your equity funds?
We are a process-driven and institutionalised fund house, and we don’t promote a star culture. Having said that, a fund manager’s perspective is important. His views are important, as they are unique to him. He takes a view on the amount of risk to take from situation to situation. Still, I would say, more than individuals, systems and processes are important, as they work in the long term.

How much weightage you would give to a fund manager?
It is difficult to assign weights, as there are many cheques and balances we follow while managing people’s money. What I can say is that a fund manager is more crucial in some kinds of funds than others. His perspective and views are more important in specialised funds like small-cap funds, where there is a smaller universe, compared to a large-cap fund. Even in sector funds, if the fund manager has knowledge of the sector, it works to the fund’s advantage, as he can then take better calls.

Coming to the performance of your schemes, they have done well over three-year and five-year periods, but they have lagged over the past year.
It depends on the style of the scheme and the state of the market. For instance, large caps have been doing well. But our mid-cap fund can’t take an exposure to large caps, as it would mean changing the style of the fund. But don’t look at one-year performance — it’s a short-term perspective. We do work to protect our downside. We aim to be consistent, and we have been so. On a year-on-year basis, the average return has been 9-10 per cent, and a couple of our funds are there.

But there are also some funds like India Leadership and S.M.I.L.E. that have given negative returns.
We need to give these funds some time, as they are theme-based. Themes might not show results in the short term, but they should work in the long term. I can say that themes like infrastructure will work, though how much is difficult to quantify.

But didn’t you anticipate that volatility and act on it?
We were focussed on the downside, but we don’t want to move away from our designated themes. We can’t always keep changing the fund’s long-term objectives with short-term volatility or market movements. It’s tough to predict factors like oil, politics and interest rates. Hence, we try to stick to the theme of the fund, and manage risk by increasing our cash holding.

Sundaram has been quite active in promoting themes. How do you narrow in on a particular theme?
A certain amount of thought and planning goes into it. The government’s policy announcements and strategic intent are critical inputs. For example, we know that the power story will happen, but will it happen one year or three years from now is difficult to say.

It’s results season again. What are your expectations?
I think it will be a mixed bag, as the impact of higher interest rates and inflation will be felt. Perhaps, net profit growth will slow down. There has also been an increase in employee costs and input prices, especially in industries that rely heavily on metals. Prices of metals like steel, zinc, aluminium and cement have risen, which will tell on bottom lines.

And how do you expect the market to respond?
The volatility will continue. And it’s not just because of domestic factors. Even global liquidity and interest rates will leave their impact on the stock market — we are not insulated from global factors anymore.

High interest rates are unsettling companies and individuals alike. Do you see interest rates falling?
Stability in interest rates is still a few months away. I don’t see rates coming down over the next two to three months at least. If anything, I feel, we are due for another upward revision. So, for now, it’s wait and watch.

So, is it a good time to invest in debt funds?
People should start entering debt funds now. Fixed-maturity plans (FMPs) are giving returns of about 10 per cent, that too with a high degree of assurance, and it’s time to get into them. At a later stage, when interest rates stabilise, you may get into medium- and long-term bond funds. Investors should also look at balanced funds, as the debt portion should generate returns comparable to what the equity portion will generate.

And what about equity funds?
India is a strong growth story and is happening. Stay invested for the long term. Get in the market to take benefits of the cycle, but don’t do so with a short-term perspective.

http://www.expressmoney.in/news/Fund-managers-matter-more-in-themes-/84976.html