AIFs, PMS Funds Offer Concentrated Exposure, Research Arbitrage, Says SBI MF's Gaurav Mehta
As India's per capita GDP heads toward the $3,000 level and the investment cycle kicks up, people will be spending more on discretionary items and companies will benefit, he says.
Alternate investment funds and portfolio management service funds provide exposure to small and mid caps in a concentrated manner and takes advantage of the research arbitrage, according to Gaurav Mehta of SBI Mutual Funds.
"The investible universe for mutual funds have started to shrink. In a large MF scheme, it is difficult to get decent exposure to very small companies," Mehta, chief investment officer-alternatives equity at SBI Funds Management Pvt., told NDTV Profit on The Portfolio Manager show.
"But, in AIFs and PMS, you have relatively smaller sizes and you can buy such stocks and concentrate."
As one goes down the market cap spectrum, a research arbitrage becomes available as big analysts tend to skip stocks after a threshold, he said. "That is where research by the fund house can create a difference."
"The portfolio is very market cap-agnostic. We are skewed towards small and mid caps and have good 25 picks," Mehta said.
In terms of liquidity concerns in small-cap portfolio, he said the company has a strong research team and tight risk assessment template to oversee the assets under management.
Mehta manages the SBI Aeon Alpha, which has an allocation breakup comprising small caps (48%), large caps (21%) and mid caps (20%). It was launched in January 2022 and has given over 19% returns as of December last year, he said.
Sectorwise, the portfolio has the maximum allocation to consumer discretionary (23.5%), followed by financial (19.9%), materials (17.4%) and industrials (12.2%), Mehta said.
Explaining the fund's bet on consumer discretionary sector, Mehta said as India's per capita GDP heads toward the $3,000 level and the investment cycle kicks up, people will be spending more on discretionary items and companies will benefit.
As income levels rise, people will start saving and investing, giving financial sector players like banks, insurance and asset management companies a fillip, he said.
The government's mega push into infrastructure building and promoting manufacturing will also lend a positive momentum to materials and industrials space, according to him.
Watch the full conversation here:
