How Invasset’s Growth Pro Max Fund delivered 71% return to HNIs in 6 months

Robust alpha generation is the key for any money manager in the domestic equity market. The latest data collated by PMS Bazaar showed that Invasset LLP’s multi-cap strategy Growth Pro Max Fund delivered 71.41 per cent returns to investors in just six months until August 31. On the other hand, the benchmark BSE500 TRI gained 17.34 per cent during the same period. In an interaction with Business Today, Anirudh Garg, Partner and Head of Research at Invasset, explained how they managed to deliver superlative returns to their high-net-worth clients. He also shared his views on various sectors, the market outlook, and their stock-picking skills. Edited excerpts:

BT: How has Growth Pro Max Fund managed to outperform in the past six months? Can you throw some light on the strategy?

AG: We are a quant-based PMS. All the decisions that we make are entirely based on a quantitative algorithm. We follow four investing styles. The first is value investing. Value investors, as you know, are those people who calculate an intrinsic value using a discounted cash flow and then buy below the intrinsic value and then sell above the intrinsic value. That is the first style of investing. Secondly, we also focus on special situations, change-based investing, or growth investing. Here, the hypothesis is primarily that every bull run has a new leader. The third style of investing is what we popularly call quality-focused investing, or what legendary investor Warren Buffet or great people like Bharat Shah do. You buy high ROC, high ROE, free cash flows, good management, and companies with good market share and long-term votes in what they do. And the fourth is pension fund investing, where you aim to get something above the fixed deposits. So value, growth, quality, and pension fund strategies are four styles of investing. At Invasset, we have combined all four together.

If you ask me how you managed to get a 70 per cent return. So, the last change that we made in our portfolio was in November 2022. We have been holding the same stocks till now.  We have the lowest expense ratio in the industry.

BT: Ok, which are your top sectoral or stock holdings since November 2022?

AG: The government announced the highest ever capex ahead of elections next year. Capex expenditure is like where you build assets and the benefits will be reaped over the next 20 years, while revenue expenditure is for instant consumption. This government went in for 19 per cent of the budgetary expenditure as capital expenditure, and this is the highest ever since 2005. So we knew very early that this was a theme. Therefore, we primarily invested in capex and capex-oriented themes like defence, railways, infrastructure, capital goods, and public sector banks, among others.

If we talk about stocks, we have been holding RVNL, Titagarh Wagons and Ircon from the railway sectors. As far as the infrastructure sector is concerned, we have names like SJVN. We are also holding CG Power and Elecon Engineering, among others. Amazing re-rating happened in the public sector banks. The only problem with public sector banks right now is that there is very little free-float in select banks.

BT: How much of a maximum amount do you invest in a stock or a sector?

AG: Our policy at Invasset is that we never allocate more than 4 per cent to a company, not more than 20 per cent to a sector, and not more than 35 per cent to a theme. We also have a policy that we do not sell our winners and do not add to our losers.

BT: Defence is one of the biggest holdings in your portfolio. How do you see the sector after this recent run-up?

AG: We believe that sectors like defence, railways, and capex-oriented themes will continue to outperform in the next 2–3 years. I do not think that they are overvalued right now. We feel that they are in a FOMO stage, and a lot of steam is left in terms of all these sectors that we talked about.

BT: Do you see any sharp corrections in the market?

AG: We at Invasset always believe that we should be ready for a 20 per cent downfall. That can come anytime if we talk about the broader markets. As Nifty is leading the world right now as compared to other developed economies, they have a tendency to approach their 200-day moving averages. At present, the 200-day moving average is around 18,500. You cannot ignore that possibility when you are investing. When we are investing in equity markets and we are hoping that we will grow at 18 to 24 per cent and double it every three to four years, this 10 to 20 per cent fall is there. I think rising crude oil prices hold a lot of importance. The cartel that Saudi Arabia and Russia have formed for themselves is a big threat. But I think we are doing well on a diplomatic level. The importance of crude in the global economy, with the coming of electric vehicles and the coming of green energy and hydrogen, will eventually decrease in the next ten years.

BT: How can US Fed decisions on rates and India-Canada tensions impact Indian equity markets?

AG: India-Canada tensions are not a big problem. On the other hand, the US Fed is the baap (Big Daddy) of everybody. I think one should never ignore the US Fed. Whatever the Fed is doing, that is what is going to happen in the world. The Fed is always right. We never move against the Fed. If the Fed is saying that there is inflation, we also believe that there is inflation. And be cautious, or, I would say, look through a very cautious lens. It is US money that is travelling all over the world. So, you have to be very cautious and not play against the spin when it comes to a Fed decision.

BT: What should be the right asset allocation strategy?

AG: Investors can consider real estate, gold, mid- and small-caps in equities for the next 3-4 years.

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