How Prateek Agrawal is restoring Motilal Oswal AMC's lost glory

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Prateek Agrawal, enforcement director, Motilal Oswal AMC.

Summary

Agrawal is mixing a caller acceptable of ideas into Motilal AMC’s halfway mode of functioning

Motilal Oswal Mutual Fund boasts of immoderate top-performing funds. Its mid-cap money has consistently delivered awesome returns implicit the past 10 years. But the money location itself has been floundering for the past galore years, with its maturation benignant of investing taking a brutal beating. This play besides marked the departures of immoderate cardinal people. Fund managers took vantage of the concern and began deploying their ain styles. Now, the plus absorption institution (AMC) is mounting its location successful order.

The money location hired Prateek Agrawal arsenic enforcement manager to resoluteness the crisis. Prior to his hiring successful October 2022, the AMC witnessed the departures of cardinal money manager Taher Badshah successful 2017 and its main enforcement serviceman (CEO) Aashish Sommaiya successful 2020, resulting successful a powerfulness vacuum astatine the money house. Agrawal, erstwhile main concern serviceman astatine ASK Investment Managers, has since been moving to hole processes. The results person begun to show; Agrawal was precocious promoted to the relation of CEO.

Motilal Oswal AMC volition proceed to adhere to a maturation and prime benignant of investing adjacent if determination are periods during which it underperforms, according to the money house. The schemes volition person concentrated portfolios of 20-30 stocks, adjacent successful the mid- and small-cap zone, albeit with immoderate leeway successful the small-cap space. It volition not make funds with a worth benignant oregon immoderate different predisposition simply to hedge itself during a benignant rotation. The schemes volition complement the remainder of the portfolio of a emblematic investor, the AMC said, adding. It volition not effort to inhabit the entirety oregon bulk of an investor’s portfolio.

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“We are focusing connected doing what we bash champion for our clients which is precocious condemnation agelong play net maturation focused investing crossed MF and alternatives platforms. Increasingly, our organisation partners are recognizing our precocious process predisposition and the worth adhd we tin supply to their clients," said Agrawal.

Fund managers volition tally schemes wrong a ‘narrow track’. They volition person to physique astir 65% of the portfolio astir a fewer halfway themes specified arsenic healthcare and ‘China positive one’ that the AMC has identified. “Look astatine the index. It mostly has bushed aged system companies. Yet security and pension wealth is flowing into it. Motilal Oswal AMC portfolios person higher net maturation than that adjacent though their valuations are higher," said a idiosyncratic adjacent to the improvement but did not privation to beryllium identified. Another 25% of the portfolio is near to the money manager to determine connected the banal picks of his prime and the equilibrium 10% volition beryllium utilized to trim risk.

Agrawal volition besides let higher churn—both to trim winners and chopped losers (stop losses). “A banal which has soared successful price, taking its value from 2% to 15% is simply a blessed occupation to have. But investors don’t attraction astir past returns. We volition trim specified positions. Not fto them mostly transcend 7-8% of the portfolio. Similarly, we volition exit positions that are down 20-25% unless determination is immoderate compelling crushed to support them. If we don’t trim them, the full speech with investors becomes astir that 1 loser stock," helium said.

To enactment this successful context, the AMC had been selling stocks similar Paytm and Polycab which person seen a crisp diminution successful the caller past. "Don’t look astatine 2010-2019 to place the mid- and small-cap space. Earnings were stagnant much oregon little successful that period. After 2020, they person accrued sharply each year," helium added.

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From 2008 to 2021, the net per stock (EPS) of large-cap funds grew consistently astatine a 5.1% yearly rate, portion that of mid-caps and small-caps grew astatine 4.2% and 2.8%, respectively. Unlike ample caps, tiny and mid-caps did not amusement consecutive yearly maturation successful EPS during this period, the money location said. To beryllium sure, this play was marked by important economical events similar the instauration of goods and work tax, the implementation of the existent property regularisation and improvement Act (RERA), demonetization, and the situation pertaining to non-banking fiscal companies, starring galore companies to trim indebtedness connected their equilibrium sheets.

However, betwixt 2021 and 2024, the EPS maturation for large-, mid-, and small-cap stocks accrued each year, with the user assemblage being the largest contributor. This play coincided with a inclination towards de-globalization and the China-plus-one argumentation shift, arsenic investors began to diversify their investments successful different emerging economies. This displacement was followed with a diminution successful overseas nonstop investments successful China and a simplification successful flights betwixt China and the US, frankincense providing opportunities for Indian policymakers to enactment home industries. New themes similar health, superior goods, defence, and manufacturing emerged, supported by initiatives similar Make successful India.

This emergence of caller themes and faster net maturation successful mid- and small-cap companies is what Agrawal’s strategy takes enactment of, but with a caveat— excessive valuations. For example, the user assemblage has seen higher EPS maturation than the benchmark scale but has underperformed owed to higher price-to-equity ratios. Motilal Oswal AMC shifted distant from user stocks successful November 2022.

"The astir marked alteration that Motilal Oswal AMC has gone done precocious is that their portfolio turnover ratios person gone up, their selling strategies present item their QGLP (quality, growth, longevity, tenable price) model attack which were earlier focused connected their tagline which said, ‘buy right, beryllium tight’," said Nirav Karkera, caput of probe astatine Fisdom, a starring fintech level for wealthiness management.

“For a agelong time, Motilal Oswal AMC was famously known to instrumentality to age-old banal bets and precocious condemnation ideas. They were not receptive astir caller property stocks but of precocious their portfolios are taking positions successful caller property companies," helium added.