It has been a great journey so far, both for our fund house and the industry as a whole. The industry is now beginning to become much bigger than we would have ever imagined.
Aditya Birla Sun Life AMC had a total average AUM of Rs 224,938 crore for the quarter ending September 2017, growing at a CAGR of 27 per cent since the quarter that ended on March 2013. Eleven of our funds now command over a billion dollar each. The SIP book size has also grown from Rs 86.9 crore in March 2013 to Rs 617 crore in June 2017.
Managing return expectations
We communicate our views to our stakeholders - investors and advisors regularly. We try to maintain the fundamental principle of delivering performance higher than the benchmark indices by few notches.
One has to believe that the future will also be good as long as we give sufficient time for the investments to deliver performance. After three years of high returns, it is prudent to lower return expectations in equities to lower-mid teens over the next three years. In debt also, nominal returns will be lower while real returns will remain positive compared to the previous three years.
Risk controls
We look at companies that have a strong competitive advantage, faster growth, good management, large market, superior product, technology, etc. Even if there is a correction in the market, these companies correct less and rebound quickly when the market recovers.
We keep our portfolio well-diversified, while staying away from high-momentum stocks. We also ensure the right amount of liquidity in the portfolio. We steer clear from blindly chasing returns in the short term and in the process we have brought a high level of alignment between the portfolio manager and the analyst. We keep a track of ownership versus non-ownership of analyst ideas in the portfolio and constantly keep evaluating reasons behind the same.
Rising industry assets
Rising assets do not pose any challenge to us because our large bandwidth gives us the capability to deploy our growing assets in an efficient manner. The challenge generally revolves around expectations versus short-term outcomes. The interest and inflation environment is becoming unpredictable due to disconnect between the market and monetary authorities' perception.
Outlook for equity and debt
While the markets may consolidate at current levels, the earnings may rebound in the second half of the year, which could trigger another peak.
Overall, we expect buoyancy to return to the Indian economy sooner than later.
On the interest-rate front, we see structurally stable inflation scenario, with low to steady price environment in general.
This article was originally published on November 16, 2017.
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