Franklin Templeton Asset Management (India) has reduced its cash position substantially and remains fully invested in equity even as the markets went on a topsy-turvy ride.
The sharp fall in key indices and the bearish sentiment amid the raging war in West Asia will have a major impact on inflows through Systematic Investment Plans.
Long view
Avinash Satwalekar, President, Franklin Templeton India, said the fund house believes in its portfolio construct and using the recent fall in valuations to top it up.
If one looks at the history of equity markets, he said, bear markets are measured in months while bull markets are measured in years, and hence investors should stop worrying about negative returns in the last two years and market volatility.
“I know it is not a pleasant situation when SIP returns turn negative, particularly when the whole notion is about keep putting money in SIP to make more money,” he said on the sidelines of an event to launch the fund house’s equity long-short SIF under Saphire SIF.
What most investors tend to do is cancel SIP, and they are technically averaging down. By doing this, he said they miss out on the opportunity to buy more units for the same rupee, and when the market turns, they will remain a laggard for long, he added.
“Markets give an opportunity every five years to truly put money to work. If you do not take that opportunity, you will get rich, but you will not get wealthy. How do you create real wealth is to do something when others are not doing it,” said Satwalekar.
Flexible strategy
On the new long-short equity SIF launched, he said investors are navigating markets that move through different phases rapidly, making disciplined and flexible investment strategies increasingly important.
Compared to conventional MFs, SIFs can potentially take advantage of market shifts by taking short positions up to 25 per cent of their net assets, which can help reduce downside risk during market corrections, he added.
Arihant Jain, Portfolio Manager, Sapphire Equity Long-Short SIF, said the underlying quantitative model for the strategy is designed to assess stocks using a broad set of leading and lagging indicators, recognising that different factors tend to perform differently across market environments.
“The model is designed to adapt while preserving a strong emphasis on risk management,” he said.