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    One should have a decent allocation in mid caps, says Neelesh Surana, CIO, Mirae Asset Mutual Fund

    Synopsis

    "A disciplined approach to investing, with focus on 'quality up to a reasonable price', has helped us deliver a satisfactory track record."

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    ETMutualFunds.com recently came out with a list of fund managers who have created the maximum wealth for investors in the last five years. Read the story here: These mutual fund managers made the maximum money for investors in last 5 years

    Neelesh Surana, CIO, Mirae Asset Global Investment, topped the list of successful fund managers. He manages two flagship schemes of the AMC - Mirae Asset Large Cap Fund and Mirae Asset Emerging Bluechip Fund. Both the schemes have performed exceptionally well in their respective categories. Surana shared the secret behind his performance in an interview with Avneet Kaur of ETMutualFunds.com. Edited interview.

    You are topping the list of fund managers who have generated the maximum returns for their investors in the last five years. Two of your flagship schemes- Mirae Asset Large Cap Fund and Mirae Asset Emerging Bluechip Fund - have performed exceptionally well, with the 5-year alpha considerably higher than the category average. In fact, Mirae Asset Emerging Bluechip Fund is the category topper in large & mid cap space in one-, three- and five- year periods. How did you achieve this outperformance?
    At the outset, I would like to emphasize that our approach is team- and process-oriented, and the performance results is primarily driven by the contribution from the research analyst team.

    Overall, a disciplined approach to investing, with focus on “quality up to a reasonable price”, has helped us deliver a satisfactory track record. Our attribution analysis suggests that at an aggregate level, alpha generation has been from stock selection, rather than sectoral calls.

    You have been managing these schemes since their launch and nurtured them to become consistent performers. What is the one thing in your 'not-to-do' list that helped these schemes to beat their benchmark and peers?
    Analysis of all three buckets – business, management, and valuation - are important from a risk-reward matrix. While selecting stocks it is important to avoid sub-par business or management, and not to overpay.

    Both the schemes have also managed the downside quite well. How did you manage the risk, while generating the highest returns in the respective categories?
    Portfolio construction is an important aspect to mitigate mistakes. Discipline, and adequate diversification is important. We seek to construct a diversified portfolio, which could handle mistakes and deliver decent risk-adjusted returns.

    You seem to love the private banking space in the financial sector. Both the schemes have large investments in the space. Why? Also, what are your other favourite and least favourite spaces?
    In the long-term, the growth opportunity is large, particularly for private financiers, given the growth in the economy, and market share gain. In the medium term, the financial sector is expected to contribute the maximum in incremental earnings growth in FY20 and FY21. Additionally, financials have the largest weightage across indices.

    Do you believe the valuations in mid and small cap space is at ease? Is the time ripe to enter or increase allocation to mid caps and small caps now?
    From a peak of around 35% premium in January 2018, mid cap valuations are now at around 15% discount to large cap (vs historical discount of around 9%). We believe that this bucket is cheap, and one should have a decent allocation in this space.

    If yes, what are the points to keep in mind before choosing a mid cap or a small cap fund?
    Consistency across market cycle and adequate diversification are important points for choosing any fund, including mid caps.

    Who should invest in Mirae Asset Large Cap Fund and Mirae Asset Emerging Bluechip Fund? And what should they expect from the scheme?
    India Inc earnings trajectory is on a recovery path, and markets are likely to do reasonably well with returns in teens. We believe that core portion (say, 65-75%) should by in a large cap fund, and the remaining in the mid cap funds.

    This interview is part of a series of interviews with top-performing equity fund managers in the last five years.

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