Over the last few years, technology has become all-pervasive and has impacted how businesses are carried out. Digital is becoming a way of life, creating not just opportunities but also increasing the complexity of doing business, shared Amey Govind Sathe, Fund Manager, Tata Asset Management, in an exclusive interaction with Srajan Agarwal of Elets News Network (ENN).
Can you share some pivotal moments or experiences that have significantly shaped your approach to fund management, especially since joining Tata Asset Management Ltd in 2015?
Investing is a continuous and never-ending learning process. As one spends more and more time in the market, investment and fund management approaches keep evolving. Over the period, the market has taught me two things: patience pays off, and compound returns over time lead to potential wealth accumulation. Timing the market is challenging as time in the market matters more.
For me, the best learning has happened in bear markets. The great financial crisis of 2008 and the COVID-19 crisis of 20 were key moments that shaped my approach to fund management. The focus is always on capital protection as well as return on capital. Equity market investing can be brutal in bear markets, and the key is to survive such phases with the least possible markdown.
What are the core principles and strategies that guide your investment decisions? How do you balance the diverse objectives of these funds, and what unique challenges do each of these funds present?
Our investment philosophy at Tata is growth at a reasonable price (GARP), meaning we seek growth but do not want to pay exorbitant prices. We want to find companies that are undervalued and entering a growth phase. We believe this approach has stood the test of time. Our core philosophy of managing diverse funds remains the same, i.e. GARP.
Sometimes, GARP gets overshadowed by growth or quality when the interest rates are low, liquidity is ample, or the market is going through irrational exuberance. I don’t see a situation where growth and quality will continuously overshadow valuations or vice-versa. Similarly, we don’t believe in ‘deep value’ as a philosophy because India is a growth market. We will never buy companies or sectors just for the value part of it or because they are offering dividend yield unless and until we see growth coming back in the sector or the company. Therefore, GARP is a good mix of finding growth at a reasonable value.
Given your extensive background in tracking the BFSI sectors, what are the key trends and developments in these sectors that investors should be aware of? How do you foresee these trends influencing your investment strategies for the Tata Banking and Financial Services Fund in the near and long term?
Over the last few years, technology has become all-pervasive and has impacted how businesses are carried out. Digital is becoming a way of life, creating opportunities and increasing the complexity of doing business. We tend to invest in future-ready companies and believe in building long-term, sustainable businesses. We look for companies continuously investing in people, technology, and distribution for future growth. We are ok if our investee companies show lower profits, but we would like them to invest in the future.
In the context of the current global and Indian economic environment, what are your views on the performance and potential of the Indian equity markets? How do macroeconomic factors such as interest rates, inflation, and geopolitical events impact your fund management approach, and what measures do you take to mitigate associated risks?
Indian economy remains in healthy condition, and most of the macro parameters indicate a stable and improving economic environment. With stable government and policy continuation, we believe India’s GDP growth is expected to be one of the fastest in the world. The penetration of financial assets in India, particularly among individual investors, has been historically lower than developed economies and we remain positive on India’s long-term structural growth potential.
The impact of macroeconomic factors such as inflation, interest rates, or geopolitical events has profound implications for fund management approaches. The key is to have an investment framework that creates guard rails to protect us from volatility caused by these various factors. Our GARP framework helps us mitigate the impact of uncertainties caused by interest rates, inflation shocks, etc.
Can you elaborate on your investment philosophy and how it aligns with Tata Asset Management’s broader goals? How do you incorporate risk management into your investment process, particularly when managing a diverse portfolio across different sectors and market capitalisations?
The basic premises of my investment philosophy are buying good companies at below-average valuations or buying strong/quality companies at reasonable valuations. I avoid buying poor businesses even if they are available at dirt-cheap valuations. I also believe that running a diversified fund is important as it helps manage unsystematic risks.
Similarly, I try to construct a style agnostic portfolio i.e. not dependent or skewed towards any specific style. I try to have an optimum balance of growth and value.
Diversification of stocks and sectors is an excellent way of managing portfolio risks, provided adequate attention is given to the benchmark.
What emerging trends and innovations in the financial markets will significantly impact fund management and investment strategies? How is Tata Asset Management positioning itself to leverage these trends, and what new opportunities do you see for the funds you manage in the evolving financial landscape?
An interesting aspect of investing is that disruptions or innovations do not alter the way of investing, as basic tenets of investing are timeless. However, innovations disrupt our investee companies in a big way, especially in financial markets, where new trends are always emerging. Currently, we think there are a few mega trends, such as Artificial Intelligence (AI) and Machine Learning (ML), Cyber security and rising regulatory compliance, that are shaping the way business is being done.
Some of these megatrends are likely to create competitive advantage and moat for many businesses in the form of superior underwriting or cost advantage or better customer experiences. Successfully navigating this evolving landscape requires strategic technological investments, adaptation to changing consumer behaviours, robust risk management frameworks, and proactive compliance measures. At Tata AMC, we believe we can capture some of these megatrends.
Disclaimer: The views expressed in this article are personal in nature and in no way trying to predict the markets or to time them. The views expressed are for information purposes only and are not construed as any investment, legal or taxation advice. Any action taken by you based on the information contained herein is your responsibility alone and Tata Asset Management Pvt. Ltd. will not be liable in any manner for the consequences of such action taken by you. Please consult your Mutual Fund Distributor before investing. The views expressed in this article may not be reflected in the scheme portfolios of Tata Mutual Fund. The views expressed are based on the current market scenario and are subject to change. There are no guaranteed or assured returns under any of the Tata Mutual Fund schemes.
Mutual Fund investments are subject to market risks; read all scheme-related documents carefully.
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