Kotak Asset Management (MF)

About

Kotak Mahindra AMC was established in December 1998 as a subsidiary of Kotak Mahindra Bank Limited. 

As per an AMFI report, it ranks as the fifth largest asset management company in India, with assets under management of INR 289,343 crores (~ USD 36.16 billion, conversion rate of $1 to INR 80) as of March 31st, 2023. Additionally, it has an investor base of over 8.1 million investors. 

The Mahindra Group has international offices in Abu Dhabi, Dubai, London, Mauritius, New York, and Singapore. It caters to the financial needs of individual and institutional investors all over the world.

Key figures from financial statements, FY 21-22 –

YearTotal Income (INR crore)Total Expenses (INR crore)EBIT (INR crore)EBIT (%)Net Profit (INR crore)Total Income (USD millions)Total Expenses (USD millions)Net Profit (USD millions)
2021-223339.312482.04857.2726.00%857.27417.41375310.255107.16

Key staff

Nilesh Shah, Managing Director – He has over 25 years of experience in the asset management space. He has been a part of the team at Kotak for the last 8 years. Prior to his current role, he worked at ICICI Prudential and Franklin Templeton Mutual Fund. He is also a part-time member of the Economic Advisory Council to the Prime Minister President of Bombay Chamber of Commerce and Industry. He completed his bachelors of commerce from Sydenham College, Mumbai and is a chartered accountant.

Harsha Upadhyaya, CIO – Debt & Equity ­He has over 26 years of experience in equity research and fund management. Prior to starting his role at the company in 2012, he worked at firms such as DSP BlackRock, Prabhudas Lilladher, SG Asia Securities, Reliance Group and UTI. He holds a post-degree in finance from IIM and CFA charter. 

Deepak Agrawal, CIO – Debt and Head of Products He has been a part of the firm since 2002. He completed his post-graduation in commerce from Mumbai University. He is a chartered accountant and CFA Level 1 holder. He started his career at the firm in research and dealing. Subsequently, he moved into fund management in 2006 and continues to work there.

Investment philosophy

The following is taken from a factsheet on the company’s website

The firm’s investment philosophy follows a “strong bottom-up with a top-down thematic overlay”. It therefore focuses on using fundamental analysis such as valuations, financial performance, growth prospects and management quality to analyze individual companies and their stocks in order to identify attractive investments. They complement this with research on market trends and macro-economic trends to gain insights on sector level and thematic insights.

Media

Tax saving as well as better returns? Harsha Upadhyaya has the answer March 28, 2023 https://economictimes.indiatimes.com/markets/expert-view/tax-saving-as-well-as-better-returns-harsha-upadhyaya-has-the-answer/articleshow/99050339.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Harsha Upadhyaya, CIO – Equities, Kotak AMC, emphasizes their diversified approach to portfolio construction, typically consisting of 50 to 60 stocks with no heavy concentration at the top. They follow a strategy of bidding on multiple sectors and stocks to derive overall returns.

Regarding tax-saving investment strategies, Upadhyaya highlights the benefits of investing in Kotak Tax Saver, an ELSS scheme. The fund offers a three-year lock-in period and equity taxation, which is lower than other tax-saving instruments. The fund follows a disciplined investment strategy, combining bottom-up and top-down approaches to identify stock opportunities. The fund’s positioning leans toward domestic businesses, and it has flexibility in market capitalization allocations.

Upadhyaya advises investors to view ELSS schemes not just as tax-saving instruments but also as opportunities for future goals and returns that beat inflation. He suggests making regular investments throughout the year rather than waiting until the last minute. When selecting an ELSS scheme, investors should consider the consistency of the investment strategy and the coherence of the portfolio. The primary advantage of ELSS schemes is the tax exemption provided through 80C benefit.

Who can continue to invest in debt mutual funds after March 31? Nilesh Shah explains March 28, 2023

https://economictimes.indiatimes.com/markets/expert-view/who-can-continue-to-invest-in-debt-mutual-funds-after-march-31-nilesh-shah-explains/articleshow/99050169.cms?from=mdr

Nilesh Shah, MD of Kotak AMC, discusses the impact of tax changes on debt mutual fund investors. Lower tax rate investors won’t be affected, while those in higher tax brackets may face a slight setback. He suggests that individuals with lower tax rates invest after April 1, 2023, for better returns. AMCs should focus on financial education and raising awareness about risk and return. Debt mutual funds offer transparency, diverse options, and liquidity benefits. Sovereign gold bonds are recommended due to coupon income and no entry premium. International fund of funds will see minimal impact as most limits are already full. Existing investments in FoFs will be grandfathered until limits reopen.

 “Growth at a Reasonable Price”, Harsha Upadhyaya, President & CIO – Equity, Kotak Mahindra Asset Management Company, said in an interview with Moneycontrol’s Kshitij Anand, 19 October, 2020 

https://www.moneycontrol.com/news/business/markets/daily-voice-our-investment-philosophy-is-growth-at-a-reasonable-price-harsha-upadhyaya-of-kotak-amc-5976511.html

The Kotak Group announced key changes at its asset management and investment advisory businesses to aid future growth plans, 23 September 2022.

https://www.livemint.com/money/personal-finance/kotak-group-announces-key-leadership-changes-11663927367345.html

Nilesh Shah on Corona Virus and Investing, Economic Time, May 11, 2020

https://economictimes.indiatimes.com/markets/stocks/news/go-overweight-on-equities-invest-extra-cash-in-a-staggered-way/articleshow/75672847.cms

Nilesh shah talks about market reactions and investment strategies that investors should focus on to gain maximum returns on their investment. As Nifty price to book value currently stands at 20% lower than its long-term average. Nearly 360 companies (out of the top 1,000 NSE-listed companies) are trading at less than P/b of 1. He suggests that this will allow long-term investors to buy good companies at attractive prices. There is an anticipation of buying coming back soon.

Further, he talks about how the market has reacted to past pandemics suggesting that “We believe it is time to be cautiously overweight on equities. Economic activity may pick-up pace in days ahead. Market history with SARs, Bird flu, etc suggests that the market has bounced back sharply after epidemics have receded. Hopefully, this time too we shall see the same.”

He views Gold ETF’s as strong investments stating that “Gold as an investment opportunity too looks attractive in the current market. Very recently, in February 2002, we had given a call to invest in gold. That call has gone right in the current scenario. We continue to believe with low-interest rates and high liquidity, gold is likely to perform well. Gold ETFs/gold FoFs may be an avenue through which gold can be invested in.”

Mr Nilesh also talks about KAMC’s philosophy of believing that ‘return of capital’ is more important than ‘return on capital’. He describes KAMC’s performance in line with its investment philosophy even during market falls. In his words – ” Despite high-risk mandates in various categories, we have been running good quality portfolios within the ambit of that regulation. Strong promoters, cash flow-backed businesses, liquidity and asset security have been key to our investment ideas. Our conduct in 2008, 2013 and 2018 clearly displayed that we keep investors first. Our conservative DNA and our transparent and constant communication is aimed at gaining and maintaining that confidence”

His views on current KAMC’S portfolio investments are as follows “The current market is offering attractive risk-return ratio in high-quality companies. Our incremental investment is happening in these high-quality companies. Thus, our portfolio quality may only further improve going ahead.”

Markets right now are swinging from optimism to pessimism, from hope to fear, ET NOW, May 06, 2020

https://www.timesnownews.com/business-economy/ma rkets/article/india-revival-mission-markets-worried-about-cost-of-restarting-businesses-says-nilesh-shah-of-kotak-amc/587692

Nilesh Shah talks about how markets are right now worried about the cost of restarting companies. He suggests He advised investors to stay away from leveraged companies as safety will be in non-leveraged companies. “Investors need to focus on the balance sheet of companies than P&L in the next three months.”

Franklin Templeton Impact, Moneycontrol, April 27, 2020

https://www.moneycontrol.com/news/business/markets/franklin-templeton-impact-flight-to-quality-would-be-the-theme-for-2020-lakshmi-iyer-5190311.html

Q) If investors have debt funds in their portfolio what should they do now? Is my money stuck is the most common question which is asked by investors?

A) I would reiterate that investors should not get be tempted to act under recency bias.

MF industry in fixed income has seen a significant shift towards high-quality assets which is reflected in the underlying scheme holdings.

Investors in debt funds should live their investment horizons intended at the time of making an investment. Open-ended fixed income funds offer daily liquidity at market-related NAVs and hence panic reactions may not be warranted.

Q) What are the steps you are taking to safeguard investors’ interest?

A) At Kotak MF, post-IL&FS, and Dewan industry episode, the focus shifted significantly towards high-quality assets. This can be seen across our FI portfolios. Return of capital has been prioritised over return on Capital.

Cash and cash equivalents across our fixed income schemes have notched up materially in line with this philosophy.

Thus, we feel confident to manage the current phase as the portfolios can be comfortably liquidated.

Kotak MF leads Responsible investing Narrative in India, April 23 2018

https://assetmanagement.kotak.com/documents/19/6fc82b28-89fe-4712-baea-5fa1ac2eb4b0#:~:text=Kotak%20Mutual%20Fund’s%20investment%20philosophy,sustainable%20basis%20for%20its%20investors.&text=%E2%80%9CGlobally%2C%20companies%20adhering%20to%20ESG,governance%20practices%2C%20deliver%20sustainable%20returns.

Kotak Asset Management Company (Kotak Mutual Fund) announced that it has signed the United Nations-supported Principles for Responsible Investment, becoming the first asset management company to lead the responsible investing narrative in India. The PRI is the leading global network for investors, committed to integrating environmental, social governance (ESG) practices into investment policies and practices.

Nilesh Shah, MD & CEO, Kotak Mahindra Asset Management Co. Ltd. said, “Investor interest is at the core of our investment philosophy and all our investment decisions have always been driven by sustainable returns. By signing the PRI, we are formally committing to responsible investing.”

“Globally, companies adhering to ESG protocols, in addition to having good risk management and corporate governance practices, deliver sustainable returns. With an evolving investor attitude towards responsible investing, we need to adapt and adopt international trends and best practices in this area. The processes outlined by PRI will help us develop a more sustainable financial ecosystem’, added Nilesh.

ESG (Environmental, Social and Governance) investing refers to a class of investing that is also known as “sustainable investing.” This is an umbrella term for investments that seek positive returns and long-term impacts on society, the environment and the performance of the business.

Why Kotak AMC is adding Insurance Stocks to its portfolio?, Bloomberg Quint, December 16, 2019

https://www.bloombergquint.com/business/kotak-amc-is-betting-on-insurance-to-enter-under-penetrated-sector-cio-says

Kotak Asset Management Company Ltd. is including insurance names in its portfolio as it believes the sector is under-penetrated and less vulnerable to cyclical volatility, according to Harsha Upadhyaya, its chief investment officer for equity.

“We do have some exposure to insurance names. There we believe that the penetration levels are very low for our country,” Upadhyaya told BloombergQuint in an interview. “Also, it’s more of long-term business and less prone to cycles as compared to asset management.” “We expect the top three private life [insurance] companies to double annual new business value in four years, extending to a 21-26 percent CAGR over the next decade,” a research note by JP Morgan said. The life insurance industry is still in the early stages of a multi-year growth story, it said, adding that major Indian life insurers reported 20-56 percent net business value growth in the first half of FY20”

Interview with Nilesh Shah – extract from book ‘Brightest Investment Minds by Anuj Shah

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Prepared by – Vidhi Agarwal 2021, Rohini Pal, December 2022

Updated by – Tanvi Gandhi, June 2023

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