Rupesh Patel, Fund Manager, Tata India Tax Savings Fund says, the fund is similar to a diversified fund without having any market-cap and sector biases
What is the investment strategy for the Tata India Tax Savings fund?
The investment strategy for the fund is to run it as a diversified equity fund with bottom up approach to stock picking. It is run as a market-cap agnostic and sector agnostic fund. The objective is to generally buy businesses which have compounding characteristics, strong growth potential, good capital efficiency and are run by competent management teams. At the same time fund does not shy away from taking opportunistic exposure to special situations arising out of market, industry or stock specific developments.
What is included in the portfolio and what is avoided?
As mentioned above, the endeavour is to buy companies with compounding characteristics at reasonable price and remaining invested as the company grows. The fund invests with long term view on the businesses and their underlying value. It desists from taking short term calls and investing depending on expectations of market directions. The decision to include or exclude a stock from the portfolio is a function of its relative attractiveness in terms of difference between its estimated underlying value and current market value.
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?
Our fund management philosophy does not believe in taking significant cash calls and trying to time the market as we believe, over a longer period wealth creation happens by buying good businesses at right prices and staying invested. Three-year lock-in period is more relevant from an investor's perspective as his investment gets locked in for three years. From the fund management perspective, it is an open- ended fund and the approach to managing this fund is similar to a diversified fund without having any market-cap and sector biases.
Any tactical miss you regret (not having, or not having enough or holding something) in your portfolio.
Nothing to regret in terms of tactical misses as one cannot get all of them right at all times. However, I regret missing on to some of the structural compounding stories as I either exited them early or did not buy them as they appeared expensive on near term valuation parameters.