Soumendra Nath Lahiri, Fund Manager, L&T India Prudence says the fund employs a bottom-up stock selection approach to identify fundamentally sound companies whose stocks are mispriced.
What is your asset allocation policy / strategy? Do you try to surrogate equity with arbitrage positions?
L&T India Prudence Fund has a well defined asset allocation strategy to manage its allocation between equity and debt asset classes. The scheme has exposure of at least 25% in debt and money market instruments at all times. The scheme invests at least 65% in equity and equity related instruments. The maximum equity exposure can be upto 75% of the total net assets, whereas debt and money market instruments allocation can go upto 35% of the portfolio. Arbitrage strategies are not deployed in the fund. Any derivatives exposure in the fund is for hedging and rebalancing purposes only.
What is your approach to managing the equity portfolio of this fund?
For the equity part of the portfolio, L&T India Prudence Fund follows a fundamentals driven bottom-up investment approach for stock selection. The scheme has a flexible approach and invests across sectors and market capitalization segments. The fund manager will generally aim to identify stocks which as per the fund manager's belief are sound, but which are mispriced. The fund manager does this by analyzing a company's business model and financial parameters, valuations and business expectations.
What is your approach to managing the fixed income portfolio of this fund?
For the debt portion, the scheme follows a flexible investment approach and invests across corporate bonds, NCDs, G-secs and money market instruments. The fund manager takes an active view of the interest rate movement supported by quantitative research, to include various parameters of the Indian economy, as well as developments in global markets. Investment views/decisions are taken after credit analysis of individual exposures and analysis of macroeconomic factors to estimate the direction of interest rates and level of liquidity. Capital appreciation opportunities could be explored by extending credit and duration exposure.
How often do you re-balance your debt and equity allocation?
L&T India Prudence Fund's mandated asset allocation is to invest a minimum of 65%-75% of its net assets in equities and 25%-35% in debt and money market instruments. The scheme looks to maintain a steady asset allocation between equity and debt component within the above mentioned range and rebalances whenever the asset allocation is outside the range allowed.
Please click here to read the analysis of this fund.
This article was originally published on May 23, 2016.
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