One of India’s best-known fund managers to steer new value fund
Axis Mutual Fund, long regarded as the poster child for growth investing, is launching a value fund and the fund will be managed by none other than its head of equities—Jinesh Gopani.
Axis Mutual Fund and Gopani have long been regarded as dyed-in-the-wool growth investors. The shift may be in recognition of a bounceback by value stocks since the pandemic.
The new fund offer (NFO) of Axis Value Fund opened on 2 September and will run till 16 September. Being open-ended, you can invest and redeem it thereafter as well.
Growth investing invests in fast-growing companies that trade at high valuations. Value investing seeks out relatively cheap companies even though they may be generating lower cash flows or may have other business issues.
The sharp growth tilt Axis pursued hit the company when the one-year performance of its key funds fell behind their peers in April, which Mint had reported. Since then, the fund has recovered lost ground on its key schemes such as Axis Bluechip and Axis Long Term Equity.
However, the risks of relying too much on a single style may have left a mark on the Axis management team.
“For our core set of funds, our existing approach remains intact. We buy good-quality companies that can deliver sustainable growth. However, we recognize that there are other areas that can complement our core strategy while offering a good long-term proposition to the investors. Take our recent launches of passive funds as an example,” said Ashwin Patni, head of products and alternatives, Axis Mutual Fund.
“Also our approach to value is different. The traditional approach is to buy cheap companies, wait for the market to recognize value and then re-rate those companies. We don’t believe in that. In the past 10 years, value has been a high-risk, low-return proposition—more volatile than growth and yet giving lower returns. Instead, our approach will take the health of the business account as well as its valuations. Jinesh Gopani will manage the fund for now and we have internal filters in place to create a universe of suitable companies for this fund. But if in the future we believe it needs a dedicated manager, we will appoint one,” Patni added.
“As long as the value strategy is clearly defined and consistently managed, an asset management company can run multiple styles in its bouquet of offerings. I don’t see any issue with a growth-focused manager launching a value fund. To some extent, it may just be an acknowledgment of the recovery in value and the need to have this type of a fund in the AMC’s list of schemes to offer style diversification to investors,” said Kaustubh Belapurkar, director-manager research, Morningstar Advisor India.
“Value is making a comeback with the broad-based rally in value stocks post the pandemic and this may have prompted Axis Mutual Fund to launch this scheme,” said Amol Joshi, founder, Plan Rupee Investment Services.
“Axis MF had a growth tilt in their schemes across portfolios and that benefited them over the last two years. Now, with value making a comeback, they may be adding this strategy to fill the space. It is to be noted that most value or contra stocks are seldom pure value or contrarian. They have a healthy dose of growth stocks to ensure they do not underperform when the strategy is out of favour in the market,” said Vidya Bala, co-founder, Prime Investor.
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