‘I will invest core portfolio in ETFs, satellite in active funds’

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In April 2020, when covid hit India and the country went into lockdown, Mint spoke to industry leaders in the financial services space to understand the impact of the pandemic on their personal investment portfolios. With the passage of a year, we are going back to our respondents to see how things have panned out and whether there are any lessons for investors. In the seventh part of the series, we talk to Swarup Mohanty, chief executive officer, Mirae Asset Mutual Fund.

A massive rally in the stock markets after the covid-19 dip has taken the equity weight in Mohanty’s portfolio from 55% to 75%. Mohanty had also moved further into equity when the market fell during the first covid wave and this pushed up his returns (with the equity portfolio up around 70%).

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Mohanty is, however, placing his fresh investments in debt, to bring its weight up from 20% to 40%. More significantly, he is moving the core part of his portfolio from actively managed funds to passive ETFs (exchange-traded funds), a shift that his fund house is also mirroring with several ETF launches over the past two years.

“Going forward, the proportion of passives (ETFs) in the core portfolio will increase significantly. This is the shift that is happening (from active to passive). The satellite part will remain invested in active funds, which offer good alpha-generating opportunities,” Mohanty told Mint.

TACTICAL PLAYS

Mohanty avoids small caps but tactically plays themes such as healthcare or banking and finance. Mirae Asset had launched a healthcare fund in July 2018, when pharma funds were coming out of a two-year correction. Healthcare and pharma stocks rallied after the pandemic and the fund sits on a handsome CAGR (compound annual growth rate) of 28.36% since inception.

Mohanty also plans to start investing in international funds and take an allocation of up to 10% of his overall portfolio. He plans a similar move into gold through gold ETFs.

Above all, Mohanty’s portfolio reflects a data-driven approach rather than adherence to dogma. With more and more active funds underperforming, Mohanty is shifting to ETFs rather than hanging on in the hope of improvement. More importantly, he has been transparent about the shift in his communication to the public, allowing those sitting on the sidelines of the active versus passive debate more evidence with which to make up their minds.

Mohanty’s shift to gold and international funds also reflects this highly flexible approach, a good example for investors who sometimes hold on to existing investments long after they have ceased to outperform.

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