Home / Mutual Funds / News /  Feeling blessed to end this innings on a winning note, says Prashant Jain in farewell letter

Fund management is like a non-stop relay race and each runner desires to hand the baton ahead of the competition and in a seamless manner, Prashant Jain, the outgoing chief investment officer (CIO) of HDFC Asset Management Company Ltd has said in his parting letter to the company employees.

As the CIO of HDFC Mutual Fund for 19 years, Jain spearheaded the management of assets worth more than 4 trillion as of 30 June across equity, debt and other schemes. He tendered his resignation earlier in July.

“Having done little else than manage money for 30 years and that too in one place, it is very difficult to move on. I could have continued but I felt it appropriate to move now as all the stars were aligned,“ he wrote in the letter.

“I had a strong desire to move when NAVs were near all-time high and when there was alpha across time periods. I thus ran out of reasons to hang in... I consider myself fortunate and blessed to end this innings on a winning note and to have achieved a seamless and smooth transition,“ he added.

In the letter Jain also shared his journey of the last 30 years as a fund manager.

The expert’s career started in May 1991, when he became the second member of the equity research team of SBI Mutual Fund.

While grappling with the basics of equities, he was given additional responsibility of handling the money market desk. “One more reminder of the importance or lack of it of equity research in those days,“ he wrote.

Post that he was made in-charge of a scheme.

After a brief stint in fixed income at SBI MF, Jain was assigned Centurion Prudence Fund, a close-ended balanced fund in 1994. This fund was renamed Zurich India Prudence Fund, HDFC Prudence Fund and finally HDFC Balanced Advantage Fund (BAF) over the years.

“On turning open-ended in 1999, the fund shrank to a mere 9.9 crore, probably because the NAV (net asset value) was above par. From this to approximately 46,000 crore in July 2022 when I handed over the reins of this fund has been a journey beyond my imagination,“ Jain said.

HDFC Balanced Advantage Fund (BAF) has delivered a CAGR of 17.91% in the last 28 years and 7 months. The fund was also at the top of peer group in its category as on 28 July 2022 across time periods from one year to 25 years, except five years where it was second.

According to Jain, 100 in this Fund has become 10,940 over this period.

The expert also managed HDFC Flexi Cap Fund since 2003 (for approximately 19 years) and HDFC Top 100 Fund since 1999 (for approximately 23 years).

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In the letter, the expert also gave a rare insight into the number of the stocks that he has picked across the three HDFC MF funds that he managed.

Jain highlighted The Pareto Principle, which states that typically 20% of the effort gives 80% of the results and vice versa. “My experience with investing is a good illustration of this,“ he said.

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Jain made investments in a total of 465 stocks in the three funds. One in four resulted in a loss. Of the total net gains of approximately 87,000 crore (including dividends), 55 stocks accounted for a gain of more than 74,000 crore (including estimated dividends) i.e. 85% of total. “If only one had the wisdom of avoiding 90% of the investments and instead invested more in the 55 stocks!," he said.

“Looked at in another way, this journey of 100 going to 10,940 was largely a result of 6-8 key decisions," Jain added.

These key decisions included staying away from the dot com bubble in the late 1990s, shifting to FMCG and pharma, which outperformed in 2002-2007 and betting on capital goods, utilities and corporate banks in the 2010s.

“Markets are reasonably efficient over long periods. The duration of mispricing or inefficiency can vary from several quarters to several years. It is important in this period to stay the course and to remain solvent (for a mutual fund manager this means to retain the job / fund)," he wrote.

Talking about his bet on public sector unit (PSU) stocks that saw sharp underperformance in calendar year 2018-20, Jain said, “As is often the case in investing, herd behaviour and majority opinion is more often wrong than right. The sharp outperformance of PSUs in recent years (I believe the best is yet to come) has reiterated this once again."

In his final words in the latter, Jain said, “Looking back at the sequence of events, I honestly feel that I was incredibly lucky to be at the right place at the right time not once but on several occasions."


Abhinav Kaul

Abhinav Kaul writes on cryptocurrencies and mutual funds at Mint. His previous stints include ETMarkets, Reuters Bangalore and Press Trust of India.
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