Interview with Ajay Khandelwal, Fund Manager, Motilal Oswal Asset Management Company

In this interview, Ajay Khandelwal, Fund Manager at Motilal Oswal Asset Management Company, shares his expertise on the company’s core investment philosophy of "Hi-Quality, Hi-Growth, and Hi-Conviction investing," and also provides his outlook on multi-cap fund flexibility, the role of quantitative models, and the impact of recent SEBI regulations on the mutual fund industry.

How would you describe your investment philosophy, and how does it align with the core values of Motilal Oswal Mutual Fund?
Our core value at Motilal Oswal Asset Management is to maintain integrity and investors' focus by generating alpha for our investors. Our investment philosophy of “Hi-Quality HI Growth and Hi Conviction investing” is perfectly aligned and an enabler to add alpha over the long term.

What sectors or themes are you particularly bullish on for the rest of 2024, and how are you incorporating them into your portfolio strategies?
Instead of sectors, we look at market themes. We continue to remain bullish on discretionary consumption, manufacturing especially capital goods, EMS, renewable power, leisure and luxury, premiumization plays besides capital market plays and hospitals.

Large and Mid-Cap stocks have seen significant movements recently. How do you balance risk and reward in this fund, and what is your outlook for this segment over the next year?
Large caps do offer better value but growth is most visible in midcap stocks. Sure, valuations are premium but they are justified by earning growth.

There are some pockets in the market where prices have moved ahead of fundamentals. We focus relentlessly on the earning cycle and make sure that we hold stocks which are witnessing earnings upgrades. On risk management, we continually recalibrate allocation based on the upside available as per intrinsic value. We believe markets will continue to do well as balance sheet quality and earning momentum continues.

Small-Cap stocks have shown resilience but come with higher risks. How do you manage these risks while aiming for high returns in the small-cap fund?
We believe that over the long term, stock returns resemble earnings growth and accordingly our focus remains on identifying high-growth businesses. On risk management, we look for small-cap stocks which are liquid and are trading at fair valuations. We endeavour to deliver superior risk-adjusted returns.

Multi-cap funds provide flexibility in asset allocation across market caps. How are you leveraging this flexibility in the current market scenario?
Multi-cap funds are required to invest at least 25 per cent each in the Large, Mid and Small-cap segments. We have taken a balanced approach, combining high growth allocation from mid and small space with select Large-Cap names. We remain bullish on growth prospects in identified house themes, especially in the mid and small-cap segments.

Quant funds rely heavily on algorithms and data-driven strategies. Can you elaborate on the specific quantitative models you use and how they have performed so far?
We are active portfolio managers focusing on Hi-Growth Investing. Our forte is adding alpha by active stock selection and allocation. We use quant only as input and the final decision of stock selection and portfolio construction is done by the portfolio manager.

SEBI has introduced several regulatory changes recently, especially concerning the categorization and operation of mutual funds. How do you view these changes, and what impact do they have on the funds you manage?
All regulations are towards bettering investor experience with better oversight. Mutual funds remain the best investment vehicle for long-term investors. Categorization of funds also helps investors in choosing the best product for their investment needs with clarity and alignment with investor goals.

What messages do you want to give to investors considering investment in any of your funds?
Invest with us in Hi-Growth, Hi-Conviction differentiated portfolios to best benefit from alpha addition by portfolio managers for long-term wealth creation. Our products will add differentiation to investors' portfolios and, in turn, help diversify them.

Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.