'Both active and passive funds have merits and can co-exist'

How is your team viewing the current market valuations and preparing for possible corrections?

We remain bullish on India's growth story and believe the widespread momentum will persist. This optimism is reflected in the stock market, and we anticipate continued buoyancy over the next decade. While current valuations are stretched, we maintain a positive outlook as long as companies demonstrate earnings momentum aligned with growth. We're taking a sectoral-level view on valuations, identifying pockets of mispricing and undervalued stocks and rebalancing where needed.

At Aditya Birla Sun Life AMC, we are strategically building portfolios around fundamentally sound companies with strong earnings potential backed by strong promoters. This ensures selections are accurate and resilient against fluctuations.

Are index and factor-based passive funds a fad or a lasting investment strategy?

The industry has always prioritised different investment needs and provided relevant solutions, offering both active and passive funds. Performance linked to indices can fluctuate; there were times when active managers significantly outperformed indices and other periods when they didn't. This doesn't imply that one fund is inherently better. Both active and passive funds have merits and can co-exist.

Passive funds' growth provides diverse offerings. It will also be one of the segments aimed at institutional investors. Investors need to view active and passive strategies as integral and complementary to asset allocation, building a well-rounded portfolio leveraging the strengths of both.

Will AI impact your business? How and why?

The industry is already supported by a rich database covering investments in customer analytics and insights. Over the past 30 years, we have built a strong track record backed by consistent growth. AI will enhance with deeper insights and in-depth analysis and boost efficiency.

Rapid-fire questions

• If your fund house had a superpower for investors, what would it be?
  Foreseeing trends with clarity.
  
• The biggest mutual fund myth you'd debunk.
  Chasing returns.
  
• An unconventional asset class you'd add to your portfolio.
  Art.
  
• A Bollywood movie that best represents the mutual fund industry today.
  Baahubali.

This article was originally published on October 24, 2024.