Ankur Arora, fund manager, IDFC Tax Advantage, says that they believe in investing in businesses that fit into their philosophy and the specific objectives of their funds.
What is the investment strategy for the fund?
IDFC Tax Advantage (ELSS) fund will invest in well-managed growth companies that are available at reasonable value. Companies would be identified through a systematic process of forecasting earnings based on a deep understanding of the industry growth potential and interaction with company management to access the company's core competencies to achieve long-term sustainable profit growth.
What is included in the portfolio and what is avoided?
Businesses which are leaders/ challengers in their space, companies with high barriers to entry. We also look for companies with good operating leverage, companies which have set up capacities without taking too much of debt.
What is avoided: Companies with high financial leverage
Tax planning funds have a different redemption pattern given the three year lock-in compared to the diversified equity schemes. How much does this factor play a role in fund management and investment? Does it have any bearing on cash allocation?
Tax portfolios are like any other portfolio, but with a 3 year lock-in. However, the subscription is open throughout the year. Hence the 3 year lock in period of investors vary depending on when the 3 years get over. Though most of the investments happen in the last quarter, the redemption pattern doesn't mimic the investment pattern.
What will you attribute the relative consistent performance of your fund in recent years?
The philosophy of investing into good businesses with low leverage has helped the fund performance.
Any tactical miss you regret (not having, or not having enough or holding something) in your portfolio?
This a part and parcel of the investment world. We continue to invest in businesses that fit into our philosophy and the specific objectives of our funds.
Please click here to read the analysis of this fund.
This article was originally published on June 08, 2016.
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