Managing a single fund for 25 years and generating high alpha, too

Prashant Jain has become the first Indian fund manager to complete 25 years managing a single fund.

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While Jain’s strategy has worked in the long term, it has also tested investor patience in the short term.
HDFC Mutual Fund’s chief investment officer Prashant Jain has become the first Indian fund manager to complete 25 years managing a single fund. He achieved this in 2019 with HDFC Balanced Advantage Fund which has generated an alpha of 9.54 per cent over the Sensex since 1994, Morningstar Direct data show.

HDFC Balanced Advantage Fund (the erstwhile HDFC Prudence Fund), launched in February 1994, is the largest equity-oriented fund in India with assets of Rs 37,395 crore as of February 2019. The fund, now categorised as dynamic asset allocation (equity can be 0 per cent to 100 per cent), in its earlier avatar as HDFC Prudence Fund (a balanced fund). Data from Morningstar Direct show that when compared to other global funds managed by a single fund manager for 25 years and above, Jain’s fund has generated an alpha of 9.54 per cent over the Sensex, second only to legendary Peter Lynch who managed Fidelity Magellan till 1977, generating an alpha of 10.92 per cent.
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Anthony Bolton managed Fidelity Special Situations from December 17, 1979 to December 31, 2007 and generated an alpha of 9.2 per cent. HDFC Balanced has returned an annualised 18.48 per cent since inception.


Financial planners point out that one of the main reason for Jain’s success is his ability to identify market cycles ahead of time and ride through cycles. For example, he made the most of the IT-driven rally between 1995 and 2000 by buying Infosys that multiplied 113 times. Between December 2000 and December 2017, Jain was quick to spot the capex/banking and commodity stock rally identifying stocks like BHEL which rose 35x, L&T 33x, Reliance 19x and Tata Steel 16x and SBI 14x. In the next cycle between December 2007 and December 2017, where FMCG and pharma stocks rallied he bought HUL which rose 8x, ITC 5x, Lupin 8x and HDFC Bank 6x.

Currently, Jain is betting on corporate banks, utilities and capex with stocks like Infosys, ICICI Bank, SBI, L&T and NTPC being the top holdings in his portfolio. Jain has had his shares of misses as well. He missed multi-baggers like Kotak Bank, IndusInd Bank, Eicher Motors and Asian Paints. Then there are a number of stocks where he exited early. Though he was quick to spot Shree Cement and made 10 fold returns, he sold off early at Rs 700. Similarly, he sold out Page Industries early on at Rs 7,000.

“Jain has a sharp ability to spot cycles ahead of time. He adopts a long-term approach to stock picking, sticks to his investment mandate and is not worried about underperformance in the short term,” says Himanshu Srivastava, senior research analyst at Morningstar India.

While Jain’s strategy has worked in the long term, it has also tested investor patience in the short term. “The transition years, where he books profits and identifies stocks to ride the next cycle have been the most difficult for Jain, as returns lag those of peers in the short term. However, if you consider block of 3 or 5 years the returns are good,” says Deepak Chhabria, CEO, Axiom Financial Services.
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