Prashant Jain | HDFC AMC Future: Kaustubh Belapurkar on Prashant Jain’s investment strategy and the future of HDFC AMC

“Chirag Setalvad is an excellent bottom-up stock picker and much of the strategies he has traditionally applied have focused on mid and small caps. But, his bottom-up stock picking skills are again very much embedded in the ethics of the investment philosophy,” says Kaustubh BelapurkarDirector – Fundraising, Morningstar Investment Advisor.



Friday was a memorable day not only for but also for the industry as a whole. One like Prashant Jain saying he’s parting ways with AMC who helped him make the name he made. What are your reactions ? One would have thought he would have had several more years at the helm.
This is indeed great breaking news. Prashant Jain’s name is synonymous with how the industry has grown by leaps and bounds over the past few decades and he has been one of the most well-known and beloved managers. It’s almost like 2013 when Sachin decided to retire from domestic cricket.

Prashant, throughout his career, has really created a lot of value for investors through the strategies he has managed, but he has also built a very solid investment process with HDFC, working with many other team members and we have interacted with many closely over the past few years. The good part is that he leaves it in extremely capable hands as he goes along.

What programs does he currently run and what is your experience with them? Many managers advised people to blindly jump into these schemes because Prashant Jain was at the helm. So, give us an idea of ​​the schemes he managed?
The three flagship programs in which he has been very actively involved and which he manages are the large-cap investment fund, which is listed in the HDFC Top 100; the former HDFC Equity Fund which is now the HDFC Flexi Cap and the former HDFC Prudence. It is now the HDFC Balanced Advantage Fund.

These are the three diets he did. HDFC Prudence/BAF have an excellent 28-year record. In a global context, it is very rare to see a single manager managing the strategy for 28 years. When you think about how it’s created value for investors since its inception, obviously BAF is over about 17%, but over the last 10 years we’re talking about 13% to 14% of the CAGR for all of these strategies.

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Remember that the BAF is not even a pure equity scheme. You need some exposure to fixed income securities to reduce risk. The value he brought is immense but we have to recognize what has happened is that over the last few years it has been a bit of a struggle especially in the 19’s and 20’s and that was perfectly understandable given the philosophy of value investing that Prashant used to follow. He stuck to his guns and this isn’t the first time he’s faced a patch where there was significant underperformance for his plans. It happened in the past too, just a few years ago, where he underperformed, especially due to his PSU banking holdings. But the emphasis was on the comfort of valuations. Picking stocks earlier than the market has paid dividends and we’ve seen how these schemes have come back since 2021, where values ​​are really coming back to the fore. So what I’m saying is if they had extremely well-run programs and he really created that kind of great value for investors throughout the market cycle, obviously that would have been a bit a drag in 2019-20, but that’s completely understandable.

This is an all-weather strategy as you have seen large caps outperform for some time. After this great post-pandemic downturn, we have seen a number of large caps take center stage. How would you describe the strategy that Prashant has brought to the table over the past two decades in HDFC AMC funds?
Prashant has been a bit of a contrarian so to speak. He looks for companies that he thinks are reasonably well managed and have good fundamentals, but are going through tough times and he seeks to identify them earlier. What happened to him was that due to prior identification, he sometimes used to bear the pain for a little while before it could really pay off.

At the other end of the spectrum are businesses or segments that he can potentially avoid where he thinks the business is great, the growth is great but the valuation is just too expensive. There are other examples where he has cut or left these positions in the past – be it infrastructure-focused companies in 2007; more recently, the way he trimmed his positions in NBFCs or some of the auto companies in 2000 before some sort of 2018 downturn because valuations had gotten very excessive.

It hurt him in the short term, but it paid rich dividends. So working with this conscious valuation bias, he is one of the leading contrarian value investors that have existed in the Indian market. While this may not happen in the short term, investors who have been patient and loyal to these funds have really reaped the dividends.

Prashant Jain and HDFC AMC have been synonymous. Therefore, one would assume that his team is stepping into what he has been trying to do for the past few years. How about the man who will step into Prashant’s shoes – Chirag Setalvad? Investors who currently have their money in these schemes should bear in mind that when someone of Prashant’s stature leaves, there is a void and the investor must then decide whether to keep their money or withdraw it?
Absolutely. I would say that Chirag is an excellent bottom-up stock picker and a lot of the strategies he has traditionally applied have focused on mid and small caps. But, his bottom-up stock picking skills are again very much embedded in HDFC’s investment philosophy that I just explained.

Obviously, valuations in this segment can tend to be a bit more overvalued and therefore a little more flexible than what Prashant would be on valuations or overvaluations. But given that Chirag has been working really closely with Prashant for over 15 years, I think he’s been pretty entrenched in the investment process philosophy of really looking for what we would call reasonable quality companies but at reasonable valuations. . They will also look at good quality management.

The other lower element is also the team of analysts who support them. They have strengthened the team over the years and they have very experienced analysts. They have also hired many senior analysts to the team over the past few years. While Chirag has been an old hand, the analysts have been there.

They have also added very experienced outside managers over the past two years. They had a few departures from the fund manager side, people who wanted to move their careers into other types of asset managers. But they have equally good if not better managers in their midst.

Gopal Agarwal is a classic case, another very well known name in the industry along with Mirae and Tata and DSP. Roshi Jain, is again an excellent fund manager that they have attracted over the past few years. Rahul Baijal recently joined from

. So overall, although some of these managers are new, they bring their elements. They have all the right ingredients and the process is quite institutionalized. The research process is fairly entrenched.

What will be interesting to see from an investor’s perspective, and that’s just in terms of what we’d like to see is which manager is going to manage these three particular strategies that I’ve outlined and if there will be adjustments or changes in how the strategy was executed from what I just described in the previous minutes.

So that’s something I could just monitor, not a cause for concern. Sachin retired but then we had the Kohlis and the Sharmas to pick up the slack. I think it’s a very similar situation. Great teams were already in place, it’s only going from strength to strength and I urge investors not to be really upset or worried.

There is a big void to fill. There’s no denying that Prashant has been synonymous with not just HDFC but for the industry, there are things that give us a lot of comfort that everything seems to be in place. The other heartwarming factor is Navneet Munot. In fact, the last big change that happened was with Navneet who was the CIO at

move to HDFC as CEO. Navneet really changed the investment culture at SBI and reshaped everything. He’s been left with a legacy that’s in good hands and I think we see that as a similar blanket and obviously, as they say, the added comfort that Navneet brings with it a lot of investment expertise so that they can always take advantage of it if necessary.

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