Prashant Jain, former CIO, HDFC Mutual Fund: The poster boy of fund management

By Ashley Coutinho

In the late 1990s , information technology stocks were all the rage among fund managers. The frenzy was such that even companies with IT-sounding names that had nothing to do with either ‘information’ or ‘technology’ saw an uptick in their share prices.

This was also a time when Prashant Jain, then a young chief investment officer with Zurich AMC, took the call to exit IT names. Grapevine has it that Infosys co-founders met Jain at their Bangalore office to convince him about the sector’s growth potential. Jain went back convinced, but stayed away from IT stocks, which he felt were in bubble territory.

Jain’s conviction paid off as the IT story unravelled and the dotcom bubble burst at the turn of the next century. Getting in a cycle early, and getting out early has, in fact, been one of his hallmarks. Jain managed to repeat the feat in 2007, when he got out of infrastructure, realty and high capex companies, which got battered a year later after the Lehman crisis unfolded.

“He has been able to keep his head on his shoulders in times of frenzy and get out of overvalued sectors quickly,” said a fund official.

Being a fund manager is not an easy task, considering the heightened volatility, higher investor expectations for returns, and the pressure to outperform peers. But the ability to keep a cool head and see things with a certain detachment have perhaps helped the IIT-Kanpur and IIM Bangalore alumnus to remain a highly successful fund manager for so long.

Although regarded as someone with a penchant for value picks, a sizeable chunk of his portfolio has been growth- oriented too. “He may have had a tilt towards value but he has generated substantial returns pure-play value strategy will not work in the long run,” said Dhirendra Kumar, chief executive at Value Research, a data tracker.

His early experiences helped shape him as a fund manager. As a research analyst at SBI Mutual Fund in 1993, Jain was able to get a ringside view of the Harshad Mehta scam as it unfolded.

In 1994, the erstwhile Twentieth Century Asset Management floated Centurion Quantum Growth Fund to ride on the euphoria prevalent at the time. The fund management team comprising Jain, Chandresh Nigam and EA Sundaram mopped up `80 crore from the new fund offer. Bulk of the money was deployed in initial public offerings, which tanked as the market mood changed. The net asset value of the fund dipped below `10 and it took several years for the NAV to clawback to this level.

“It’s not easy to find fund managers with impeccable credentials such as Jain. His earlier experiences, perhaps, taught him to steer clear of shady names and stay focused on sustainable and fundamentally sound businesses,” said Kumar.

Jain’s fund management strategy has been questioned in the last few years as the performance of his funds floundered. The period between 2015 and 2019 was particularly tough as his PSU bets backfired, the market leaned towards growth stocks and became increasingly polarised. With the value the me back in favour, Jain has redeemed himself somewhat in the last year and a half, said market watchers.

As he hangs his boots at HDFC MF, Jain’s returns score- card remains impressive: all three of the funds he managed have given 17-18% CAGR since inception. That’s no small feat considering that each of these schemes have been around for nearly two decades. The market rally in July made him the first fund manager in India to manage Rs 1 trillion equity assets, which is about 4% of the equity assets managed by all Indian mutual funds.

“Jain was a rare breed even among star fund managers,” said an industry observer. “He built a strong long-term track record. His funds were among the largest in the industry and he was consistent with running his strategies.”

All attributes that you would associate with a best-in- class fund manager.

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