Is Sandeep Sabharwal back in play (DNA)
Is Sandeep Sabharwal back? One look at the performance of JM Financial Mutual Fund’s equity schemes indicates the fund house has revived its fortunes after he joined.
On a three-month basis, five of the top 30 schemes in the equity category of mutual funds belong to JM, a fund house never known for its equity offerings.
For the period under consideration, there were 279 equity schemes available in the market. Even over a longer period of six months, 3 of the top 10 schemes in the category belong to JM Financial.
Sabharwal joined JM Financial Mutual Fund in December 2006. Before that he had worked wonders with the equity schemes at SBI Mutual Fund, where he was the head of equity between 2003 and 2005.
Mutual fund investors seem to have taken note of JM’s recent good run. When Sabharwal joined, the fund house managed just Rs 150 crore in equity assets.
Now, six months since his joining, its equity assets under management have swelled to over Rs 750 crore. “When we got a new team and started restructuring our schemes in the first quarter of 2006, people were a little skeptical. But now, with performance and the growth in assets, investors have slowly started instilling confidence in us,” said Sabharwal
Take the case of JM Basic Fund, which is the number one scheme in the equity category over a six-month period, having generated returns of 38.4%. In fact, over a one-year period, the scheme has generated returns of 86.1% and ranks third among the equity schemes available in the market.
The assets under management of the scheme, which stood at Rs 9.03 crore as on December 31, 2006, roughly around the time Sabharwal took over, had swelled to Rs 150 crore as on June 30, 2007
The scheme’s pet themes are capital goods, engineering, construction, metal, material and oil & gas. “Our focus was to broadbase the portfolio and it has paid off,” said Sabharwal
What has clearly worked for Sabharwal is his old habit of betting on concentrated portfolios. For example, the JM Emerging Leaders Fund, which “invests in companies that can be in multiples of their current size”, had 50 stocks when Sabharwal took it over
Today, of the 25 stocks, only one remains from the earlier portfolio. Sabharwal is keen on keeping it a lean fund with a low portfolio churn. The assets under management have grown to around Rs 130 crore now, compared with Rs 50 crore six months ago
JM’s Financial Services Fund, which is ranked number 1 in the three-months returns category made a killing on India Infoline. It bought the stock at around Rs 350 levels, and sold it at Rs 700 levels about a month ago. And considering that 9% of the fund’s portfolio was in this stock, the gains for investors were phenomenal.
We believe that financial services and telecom are going to do well in the next five years. But as a strategy, we are not pushing sector funds, because they are more high-risk funds. We are asking investors to get into diversified equity and thematic funds,” said Sabharwal
Another factor that seems to have worked in Sabharwal’s favour is the low equity asset base when he took over. As mentioned earlier, when Sabharwal took over, the fund house had only Rs 150 crore in its equity schemes
“Having low assets works in your favour initially. It makes it easier to restructure if you have a smaller portfolio. But in the long run, a fund being too small or too large will work to its disadvantage,” says Sabharwal
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Concentration pays for Sandeep Sabharwal too!!
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