In an interview with ETMarkets, Oberoi said: “The fund’s investment philosophy focuses on buying a stock at a discount to its estimated intrinsic value and identifying special situation opportunities,” Edited excerpts:
Thanks for taking the time out. The ACE Fund AIF has done phenomenally well in both the short and long term. Please take us through the performance.
We delivered a return of 72% in the first year. This year, as of now we are generating 64% year on year return. Prudent Equity Ace fund is a diversified fund wherein we follow a Multicap approach.
The fund has few core holdings with a long-term view along with several special situations which we keep churning from time to time.
The fund is overweight on infra and construction names, several of which have delivered triple digits returns. We also have exposure to select banking and NBFC names.Here we find valuation comfort along with our desired growth rates. One sector where the exposure is negligible throughout has been IT and that remains the same as on today as well.
How much wealth one would have made if he/she invested in the fund in the NFO period? (Investment – Rs 1 cr)
Post adjusting for fees and capital gains tax, the investor money has doubled in less than 24 months.
How do you pick stocks for the fund? What is the investment methodology?
The fund’s investment philosophy focuses on buying a stock at a discount to its estimated intrinsic value and identifying special situation opportunities.
This requires us to consider both valuation and growth, rather than just focusing on growth regardless of the price being paid.
For us, being non-controlling investors means our success hinges on buying at the right price, and that’s where we place our primary focus
How are you looking at markets right now? We are trading near record highs even though there are fears of a global slowdown?
A part of the market is frothy. At the same time, we are finding a lot of value in certain segments of the market. I would say that overall, the market still offers enough investment opportunities.
Small & midcaps are on a dream run; however, there are certain pockets that might be looking overvalued or expensive. How are you navigating these considering the fact that the AIF is mid & smallcap-heavy.
We follow a flexi cap approach in the AIF. At times we go as high as 30% in large caps. We remain very agile in our approach when it comes to moving the capital. As and when new opportunities are available, the funds are moved accordingly.
With 5k listed companies, and new IPOs coming every day, the universe is widening by the hour, and we continue to find opportunities in various segments.
Your portfolio is heavy on construction and Engineering, Infra, banks, and NBFCs. What makes you so positive about these sectors – is it the India growth story?
I think the India growth story is something to be sold for foreign investors. Domestic investors who have been a part of the markets are aware that historically for decades the index has delivered ~12% returns, active money management delivers even higher returns.
So, when during challenging times the markets have delivered so well, there is no reason to believe that the next 5 or 10 years would be any different.
Our portfolio remains a focused one with a few large core holdings and several opportunistic bets. We like to deploy as much capital where the conviction is high and that has delivered fruitful returns.
What are the queries that you are getting from your clients, especially at a time when markets are trading near record highs?
Thankfully we are blessed with a client base who is smart enough not to worry about such highs and understand that it is a part of the journey.
In fact, their relentless addition at every dip is just amplifying the fact that ours is a mature client base. People with the right asset allocation in place will continue to be rewarded in the long term.
There is some chatter on US recession, or a slowdown and a rate cut by the US Fed in 2024. How will that impact India and equity investments?
Interest rate cuts will be positive from the valuation point of view. More important than the fear of recession would be the upcoming elections in the US.
The outcome could lead to substantial shifts in global business economics and policy, which would have far-reaching implications for major economies, including India.
The interplay between US domestic politics and international economic policies will likely create ripple effects that investors should closely monitor, as these developments could influence global markets and investment strategies in India as well.
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