Amit Ganatra, Fund Manager, Invesco India Tax Plan says that the fund does not take any cash calls
What is the investment strategy for the fund?
The fund is primarily driven by bottom-up stock selection with an overlay of top down views and valuations to construct the Fund's portfolio. The portfolio typically has 30 to 40 stocks and is always well diversified.
What is included in the portfolio and what is avoided?
We invest based on our proprietary stock categorisation system, which serves as the primary tool for stock selection. Overall, our preference is for companies that demonstrate a healthy return on equity. This is evaluated over a business cycle where appropriate. Sustainability of growth, cash flows, strength of the business model and balance sheet are other important factors along with valuation.
The avoid list is evolved from both quantitative as well as qualitative factors. Qualitative factors are basically companies that have low returns on capital on a structural basis and companies where management actions are a concern. We also stay away from companies, which don't have a very sustainable growth path. We prefer not getting into companies where there are concerns on balance sheets.
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?
We utilise the lock period of three years to advantageously invest in companies, which require a slightly higher gestation period. Therefore, our approach is to be patient and invest a proportion of fund assets in smaller and often younger companies where we can benefit from growth. The fund does not take any cash calls, and endeavours to remain almost fully invested into equities at all points of time.
Any tactical miss you regret (not having, or not having enough or holding something) in your portfolio.
In retrospect, we may have exited some growth stocks too early, on valuation concerns.