'Fund manager-led strategies crucial for mid and small caps'

Model-driven vs human-led portfolios?

Model-driven strategies grow faster, but manager-led approaches remain vital, especially in emerging markets.

In India, quantitative models are reshaping portfolios. Their rise will be fuelled by better data, evolving SEBI rules, demand for transparent products, tech-savvy investors and advances in AI and fintech.

Still, model-driven portfolios form under 2 per cent of open-end equity assets. Growth is likely, given the low base and rising focus.

Fund manager-led strategies remain crucial, especially in mid and small caps, where information gaps persist. Here, human insight drives alpha through deep research and market biases.

Post-stress test safeguards?

At Sundaram, beyond robust fund liquidity frameworks, we track stock- and portfolio-level liquidity, days-to-liquidate, trading volumes and investor concentration, while enforcing strict exposure limits.

Even before stress tests were mandated, we shielded clients from avoidable risks. Their

formal adoption has added structure and discipline, enhancing transparency and portfolio resilience.

On low-friction investing and investor churn.

The rise of digital investing platforms has altered investor behaviour, particularly in holding periods and portfolio churn. Since 2020, the median holding period for direct equities has fallen from 24-30 months to just 9-16 months by 2024. Over 40 per cent of mutual fund units are redeemed in a year, with just 3 per cent held for over five years. To address this, we have:

• Gamified investor education for financial literacy.
• Launched Investor App with seamless access and smart tools.
• Introduced paperless onboarding via three-step eKYC.
• Launched ‘Prosperity SIP’, combining wealth creation with systematic withdrawal options.
• Launched products like multi-factor and business cycle funds.
• Maintained a ‘Knowledge Corner’ to guide investors and distributors on goal-based investing.

Rapid-fire questions

• One AMC you admire (not yours): Franklin Templeton. 
• One hot trend you’re glad to have skipped for your investors: Single-factor funds, narrow thematic funds.
• One fund manager, past or present, you would love to have on your team: K N Sivasubramanian.
• Beyond returns, one criterion you want investors to judge your AMC on: Business ethics, regulatory compliance.  
• If not running an AMC, what would you be doing? Run a big data analytics business.

This article was originally published on October 27, 2025.