Viraj took over management of Bandhan Flexicap Fund in Jan 24 when it was witnessing a spell of bad performance. In the last six months, he has adopted a three-pronged strategy to bring back and sustain performance: (1) more balanced on style across quality, growth and value(weights to be influenced by market conditions) (2) more dynamic and model based on cap size allocations – truly flexi in that sense and (3) aim to deliver moderate outperformance consistently rather than shoot for aggressive alpha.
The fund was historically very quality focused – a style that has underperformed the market and dragged down fund performance. Viraj has adopted a more balanced approach across quality, growth and value to capitalize on opportunities across the market with a style neutral approach.
A 6 factor model that compares relative valuations between the large cap 100 stocks and the next 400 of the broader market guides large cap allocation between 50-80% and mid/small cap allocation between20-50%.
While this model based allocation has resulted in the fund being about 10% more in large caps vs peer group average (75% vs 65%),Viraj says the model is clearly suggesting that mid and small caps are extremely overvalued compared to large caps – and he would rather be cautious than aggressive when indicators are flashing red.
In a market that looks richly valued, Viraj finds banks, insurance companies and consumer discretionary stocks reasonably valued and capable of delivering 15% compounded growth over the long term from here on.
From a short term perspective, he finds US generics focused pharma stocks and power stocks attractive.