In an interaction with Sandeep Bagla, CEO, TRUST Mutual Fund

What is the core philosophy that drives TRUST Mutual Fund’s investment strategy, and how does it differentiate you in a highly competitive market?
India is a structural high-growth market, which offers alpha investment opportunities consistently to Indian investors who have the patience to remain invested over a long period of time as the story unfolds.
The core philosophy that drives us at TRUST Mutual Fund is to create portfolios which provide the right mix of risk and reward for our investors. We believe that if we are able to identify companies which benefit from the multiple megatrends, have exceptional leadership and are creating intangible assets such as strong brands, customer satisfaction, and technological advantage, we can deliver superior risk-adjusted returns. We call this Terminal Value investing. We are also cognisant of valuations and want to invest in businesses which offer Growth at Reasonable Valuations (GARV). We try to achieve an optimum combination of growth and valuations.
 

With inflation softening to a six-year low, what’s your take on the near-term outlook for the equity and debt markets?
Low inflation is important for sustained economic growth and the welfare of corporates and consumers. India has moved from a high-inflation economy to a low-inflation economy in the last few years on the back of better supply-side management and prudent fiscal policies. Equities are well supported by strong macro fundamentals, high government capex, and low interest rates. Debt markets are expected to be range-bound with a positive bias. Equities too are likely to be range-bound for some time to come as growth is expected to come back, but the near-term results are likely to be disappointing.

What’s your outlook on passive vs active investing, and how is your AMC balancing both in its product suite?
In my opinion, the hunt for alpha in Indian markets is for real. There are new listings, new sectors opening up, and companies and sectors experiencing exceptional growth phases where stocks can outperform. Indices have limitations about sector exposure, size restrictions, seasoning requirements, and are backward-looking. Active fund managers can pick promising stocks before they gain the size and traction and are included in benchmark indices, and in a higher proportion of the index once they are included. Investors would do well to divide their investments in both passive and actively managed funds.

Do you plan to expand your distribution footprint beyond Tier 1 and Tier 2 cities? How important is the B30 segment for you?
The ease of investing in mutual funds, democratisation of information, and persistent efforts of the industry and distributors have resulted in greater participation from B30 cities in recent times. We expect a greater proportion of incremental flows from cities beyond Tier 1 and 2, as their allocation to equities is relatively lower. We at TRUST MF are increasing our distribution to smaller cities through a carefully calibrated hub and spoke model.
 

Do you think the surge in SIPs is backed by adequate investor understanding, or is there a risk of herd behaviour that AMCs must actively address?
SIPs are backed by strong customer experience and not always by an understanding of the market nuances. Investors have understood that India is a long-term structural growth story and companies' profits and stock prices, at the index level, tend to compound at real GDP growth plus inflation rates. Mutual funds are transparent, liquid, effective tools to participate in the India growth story. Patient investors have made money by investing through SIPs, which helps them average their cost through market cycles and stay invested for long periods of time. We at AMCs emphasise the importance of lengthening the period of investment rather than timing the market.

Could you share the strategic thinking behind your recent multi-cap fund launch? What makes this offering timely in today’s market?
There are certain core categories of mutual fund schemes which allow investors to take exposure to different segments of stock markets in a systematic and structured manner. Multi-cap funds are one such core category which ensures that investors take a minimum 25 per cent exposure to large, mid, and Small-Cap segments at all points of time. It is a unique fund structure that is becoming popular with investors as it effectively balances volatility and returns.