India's Best Fund Managers 2017

"Focus on protecting the downside to generate superior returns"

Pankaj Tibrewal on the secret sauce for investing in mid-caps

Soumik Kar

Permanent loss of capital is a thought that always keeps Pankaj Tibrewal on the edge. It’s not without reason, for the fund manager manages assets worth Rs.2,329 crore across mid-cap, emerging and balance equity funds at Kotak Mutual Fund. While the 38-year-old knows the importance of protecting the downside when it comes to investing, it has in no manner hampered his return scorecard. Tibrewal’s mid-cap fund has clocked a 44.32% annualised return over the past one year and 35.72% over the past three years. In comparison, the Kotak Emerging Equity Fund, which focuses more on smaller companies, has yielded a much better return — generating close to 46.95% annualised over the past one year and 40.13% annualised over the past three years. Tibrewal’s funds have significantly outperformed the benchmark indices like the S&P BSE Mid-Small Cap Index, which has given a return of 39.48% in the past one year and 27.83% over the past three years. In an interview with Outlook Business, Tibrewal speaks about his investing style and where the opportunity lies in the mid-cap space.

You have been managing the mid-cap, emerging equity and balanced funds for a while now, tell us how have you weathered Black Swan events such as the 2008 crisis or the recent demonetisation, which caused major upheaval in the market?
First and foremost, you cannot predict the future, at best, you can only prepare for it. In that sense, the one thing that keeps me awake at night is the fear of permanent loss of capital. I cannot predict if there is going to be demonetisation tomorrow or a 2008-like global recession. Last year, around this time, there was a scary situation. Because of the Chinese economic scare, crude, metal and emerging market currencies had tumbled. Equity markets, including India, too, were hammered. My focus is only on how to mitigate risks at the portfolio level and cushion it against such unpredictable events. I have to make sure that we can protect our capital in the event of a downfall, because if your capital gets eroded it will take very long for you to bounce back. But that doesn’t mean you don’t take risks. How well you can manage those risks will decide the outcome. That can only come with discipline and a process-driven

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