'We anticipate active, passive and factor-based strategies to co-exist'

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

There exists an arm's length between investments and my role as CEO. I don't participate in day-to-day investment activities.

But if you ask me, large-cap equities are reasonably valued, and few pockets in the mid- and small-cap segments have stretched valuations. Excluding those pockets, small- and mid-cap segments also give good long-term opportunities. We intend to build equity portfolios that are expected to do well over the medium to long term.

At LIC Mutual Fund, our investment framework for equity involves both a top-down and a bottom-up approach. Our research-based approach helps build a strong long-term portfolio by identifying fundamentally sound investments, enabling informed decision making and positioning the portfolio to withstand market corrections through strategic allocation and risk management. The medium- to long-term view may help an investor as well as a money manager make money in equities.

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

As more investors participate in our equity markets, they may look for more means to earn in equities. Globally, passively managed schemes and factor-based index funds have attracted many investors.

As Indian markets evolve, we anticipate passive, active and factor-based strategies will co-exist. Investors keen on the relatively low cost of investment, a simplified investing approach without fund manager risk, may opt for passive and factor-based index funds.

Will AI impact your business? How and why?

We view AI more as an opportunity than a threat. It can improve efficiency in various functions in the asset management business. The biggest impact may be seen in client-facing functions such as investor servicing, sales and marketing. AI may help asset managers conduct needs analysis and offer customised solutions to clients in a cost-efficient manner with minimal errors.

Rapid-fire questions

• If your fund house had a superpower for investors, what would it be?
  Ability to foresee market inflection points with precision.
  
• The biggest mutual fund myth you'd debunk.
  Mutual funds are only for the wealthy or experienced investors.
  
• An unconventional asset class you'd add to your portfolio.
  Private equity.
  
• A Bollywood movie that best represents the mutual fund industry today.
  Swades: We, the People.

This article was originally published on October 30, 2024.