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WF: You have transitioned from a fund house with a very clearly articulated process to another that is equally focused on its process. What are the key distinctions between the processes and how might that impact your personal investing style?
Taher: Having the continuity of a process-driven approach executed in a disciplined manner is by itself a great starting point that should help make the transition easier. While both processes insist on uncompromising importance of quality businesses with long-term competitive advantages, we at Invesco have consistently applied the right mix of growth or value investing based on individual product mandates.
WF: In your previous assignment, large bets were encouraged in high conviction stocks, however Invesco has a robust risk control framework that discourages outsized bets. How do you see the pros and cons of these approaches?
Taher: At Invesco, the fund's investment objective is paramount. Stock selection, Industry and asset allocation, flow from the funds objective. We have a proprietary stock categorisation framework which provides the framework, the flexibility and the limits, which the fund manager must adhere in other to generate alpha. For e.g. Invesco India Growth Fund, Invesco India Dynamic Equity Fund, Invesco India Business Leaders Fund,which run with high levels of concentration, based once again on individual product mandates. High-conviction positions for fundamentally strong companies is encouraged even as risk control is typically monitored at the portfolio aggregate level.In general, across portfolios, we normally run active weights in most positions of the portfolio within the regulatory framework. The pros and cons of a concentrated or diversified strategy is more on perceived risk and return even as the actual risk and return will substantially depend on the underlying choice of stocks in the portfolio.
WF: What are some of the changes that you are making in the equity portfolios of Invesco MF to align them with your strong convictions?
Taher: My broad endeavour will be to maximise the advantages of the mandates forevery productby deploying the best ideas of the investment team togenerate the most desirable outcome for our investors from that portfolio.
WF: Are the mid and small caps spaces in overvalued zone now or is there still an investment argument for mid and small cap funds?
Taher: There is still an argument for a well-run, well-constructed midcap fund in a country like India given there are still several growth businesses that can emerge as winners over the next 3-5 years. One must ensure that on the growth/valuation matrix, the aggregate portfolio does not tend to become excessively expensive that may lead to underperformance. Pockets of overvaluation at an individual stock level may not be as much of an issue. It's the aggregate of a midcap portfolio that can make a difference.
WF: You mentioned in a recent interview that there is still very little macro and micro evidence of a sustained cyclical recovery. What really ails our economic recovery? Is there a risk to the cyclical story?
Taher: Current economic data is certainly not indicative of a broad-based cyclical recovery. Even as segments like cement, road construction and more recently commodities are doing well, industrial growth and manufacturing are muted. Many industries still suffer capacity under-utilisation which is holding back fresh capital investments besides non-performing assets at banks which are constraining fresh credit growth. Meanwhile, we derive hope from the recent recovery in global trade as isevident from some global indicators such as the World Trade Outlook Indicator (published by the WTO) which is consistently rising for the past two quarters. This is also likely feeding into global commodity prices and also in India's export growth that has turned positive in recent months after nearly 8-10 quarters of decline. At the margin, this upturn in global trade should support even India's cyclical recovery in the next couple of years.
WF: World stock markets are hitting new highs, and the 8-year bull market continues to forge ahead despite imminent US Fed rate hikes and potential trade disruption from actions of the Trump administration. Are you sanguine or uncomfortable with global markets and how might this impact our market?
Taher: As discussed above, there are indicators that suggest world trade is reviving, led perhaps by the US and stability in China. Even lead indicators in Europe portend a recovery. However, whether this is a blip or a fair cyclical recovery after a gap of 6-7 years post the global financial crisis (GFC) is yet to be ascertained. One also hopes that recent protectionist rhetoric does not scuttle this recovery. Should this recovery sustain, I think it will support India's economic growth especially if domestic investment growth remains challenged.
WF: What themes are you most optimistic about over the next 12-18 months and why?
Taher: One theme which will likely stand out is 'Organising India', helped mainly by the upcoming Goods & Services Tax (GST) and wittingly or unwittingly from demonetisation. We reckon there will be several winning categories with few large beneficiaries in these categories that will be durable investment stories for the next 2-3 years.Besides, there are early trends of consolidation in few sectors such as oil and gas, telecom and BFSIsectors and this will likely gain momentum soon.
DISCLAIMER: The views are expressed by Mr. Taher Badshah, CIO - Equities at Invesco Asset Management (India) Private Limited. The views and opinions contained herein are for informational purposes only and should not be construed as an investment advice or recommendation to any party or solicitation to buy, sell or hold any security or to adopt any investment strategy. The reference to the scheme(s) mentioned herein are only in context with the question asked and should not be construed as an investment advice or recommendation to any party or solicitation to buy, sell or hold any scheme(s) or to adopt any investment strategy. The views and opinions are rendered as of the date and may change without notice. The recipient should exercise due caution and/or seek appropriate professional advice before making any decision or entering into any financial obligation based on information, statement or opinion which is expressed herein. Invesco Mutual Fund/ Invesco Asset Management (India) Private Limited does not warrant the completeness or accuracy of the information disclosed in this section and disclaims all liabilities, losses and damages arising out of the use of this information.
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