Focus on stock-specific features

Sachin Relekar is fund manager-equity at LIC Mutual Fund. Relekar, who joined LIC MF in late 2012, has spent more than eight years in equity research across sectors like construction, infrastructure developments, power utilities, steel, oil & gas and automobiles.

Relekar currently manages investments for several open-ended, close-ended and equity exchange traded funds (ETFs) at LIC MF The open- ended schemes are LIC MF Growth Fund, LIC MF Midcap Fund, LIC MF Unit Linked Insurance Scheme, LIC MF Infrastructure Fund and LIC MF Tax Plan.

The close-ended schemes are LIC MF Capital Protection Oriented Fund Series (Equity) and LIC MF Dual Advantage Fund Series (Equity).

As of August 2018, LIC Mutual Fund has assets under management (AUM) of Rs 22,723 crore, of which Rs 3,137 crore is into equities.

Investment strategy

Relekar largely follows a bottom-up investing strategy, which focuses on individual stocks than the sector or the economy. Macro is considered as a risk. So, for stock selection, the mutual fund house follows an elaborate framework comprising five parameters, which include business sustainability and corporate governance, capital efficiency, competitive advantage, scalability and last but not the least valuations.

“We avoid businesses where business sustainability could be an issue due to any of the things such as technology disruptions and environmental/regulatory/tax changes and companies that have acted against minority shareholders interest or taken some wrong capital allocation decisions,” says Relekar.

For capital efficiency, Relekar looks for businesses having healthy and improving capital efficiency and check whether incremental capital investment can happen at better return ratios. He also looks at competitive advantage, where businesses which can maintain its profitability or has certain sustainable competitive advantages are appreciated. He then considers scalability. “Along with the above two we look for business which offers good growth potential. The scalability, along with capital efficiency and competitive advantage, creates value. Finally, we go through valuation, the objective is avoid overpaying even for high quality business,” says Relekar.

According to him, investors need to give importance to asset allocation. The right assessment of one’s risk appetite and risk taking ability will help in optimal asset allocation. Optimal asset allocation decision helps in achieving financial goals.