In this series, Investment Week speaks to some of the winners of the Fund Manager of the Year Awards 2020 about their teams, how they construct portfolios, performance drivers and how their particular strategies may develop in the future.
Today we talk to Mirae Asset, whose India Sector Leader Equity fund won the Equities: India Award.
Can you tell us about the winning team on the fund and how you construct the portfolio?
The team consists of lead portfolio manager Rahul Chadha, co-portfolio manager Saniel Chandrawat and six analysts.
As chief investment officer at Mirae Asset Global Investments (HK), Chadha oversees the entire Investment Unit while managing the firm's flagship Asia and India funds.
Meanwhile, Chandrawat manages the firm's India Infrastructure fund and Asia Pacific Healthcare fund. His research responsibilities include coverage of regional healthcare, energy and utilities sectors.
Construction of the portfolio begins with a quantitative screening, i.e. financial risk, business risk and liquidity risk of the investment opportunity set consisting of 4,000+ Indian stocks.
This is followed by a qualitative screening, i.e. management quality, competitive dynamics, earnings growth and assessment differentiation from consensus and valuation models.
Post-screening, the stocks derive down to a focus list consisting of 175-200 stocks. The analyst team then applies a sustainable competitiveness scorecard before they arrive at a pool of 60-70 stocks for the country recommendation list.
When a stock is added to a recommendation list, it is screened by our in-house ESG process. This is a mandatory step before the stock can be considered for the portfolio.
The portfolio is a high conviction blend of established and emerging sector leading stocks. Established sector leaders, large cap companies with credible track records, constitute nearly 60%-70% of the portfolio providing steady growth and strong downside support.
Meanwhile, emerging sector leaders balance 30%-40% of the portfolio, constituting young fast growing companies with category leadership in nascent, underpenetrated segments.
The emerging sector leaders share traits of strong entry barriers, disruptive managements with their established peers and despite short term volatility, aim to provide superior returns in the medium term.