For most average investors, investing their money in a fund with a proven historical track record is a good start. The simple answer to this lies in the current state of the stock markets, where the difference between the best performing and the worst performing fund is fairly narrow. The reason for such an outcome is the current bull run, when it becomes difficult to differentiate between the good and the not so good fund.

Thus, it becomes pertinent to check the fund manager’s ability to manage the downside, when it occurs and also their ability to manage a fund with bigger assets because of an increase in money flows into it. It is evident that many a times, short-term performance may be driven by luck, but in the long run, wealth creation has always been driven and heavily influenced by the fund manager's skills.

This week, we will be featuring interviews of eight of the finest money managers, who have repeatedly demonstrated their superior skills with consistent returns, within the defined investment framework of the funds they manage. As you evolve as a mutual fund investor, start assessing fund managers to invest with those who have proven their skills; after all as goes the saying—form is temporary, class is permanent.

Optimising risk-returns

What approach do you follow towards investing in the funds you manage?

My approach has been to look to blend growth investing with a value bias. Searching for long term trends / themes that offer growth is crucial while stock selection within through a bottom-up investing style has helped. Simple, scalable businesses with strong promoters/managements operating with sustainable competitive advantages are attributes that we look for in companies. The desire to look for long-term alpha creation while putting up with short-term pain is something that has helped me over the years.

What is the one theme that you are bullish on currently?

Rising agricultural incomes and improved rural prosperity is a key theme that one should be playing. The sectors in the ‘farm to fork’ supply chain stand to benefit from secular demand growth as farming, market practices becomes more evolved and food processing investments accelerate. We expect a significant improvement in organised processing / manufacturing in the agri-output chain which is expected to create a lot of value.

With more number of households moving up the income curve, the growth driver in many consumer products, particularly on discretionary side, could shift to the rural side as there would be a big lifestyle shift that is happening. The tailwinds are from the financial inclusion efforts of the government which has spurred deeper penetration of the various financial institutions resulting in easier and cheaper access to credit. This strong move on the rural economy coupled with the urbanisation trends will ensure secular growth in emerging areas like insurance, wealth management, consumer discretionary and healthcare.

Name the one investing lesson you will never forget.

Downside protection is as important as maximising upside while investing which means being conscious of the risks in order to optimise risk-returns. This also means no emotional attachment to the stocks that one owns.

S Krishna Kumar, CIO - Equity, Sundaram Mutual Fund

olmdesk@outlookindia.com