PGIM India Portfolio Management Services (PMS) is a business of PGIM India Asset Management Private Limited, a wholly owned business of PGIM incorporated on 04 June, 2009.
PGIM India PMS, registered with SEBI (Registration no. INP000006952), offers customized equity strategies with a focus on long-term growth and value generation.
Directors of PGIM India (PMS) are Muralidharan Rajamani, Glenwyn Peter, Adam Broder, and V. R. Narasimhan. The portfolio manager is Himanshu Upadhyay.
It is based on two fundamental principles
(1) Buying when the future is uncertain
It believes on purchasing the stocks before the market does (when the markets are down in the short run) to gain long term price movements.
(2) Seeking to avoid permanent loss
It focuses on avoiding permanent loss (since temporary losses are unavoidable) by ensuring investments in a company with good quality management and at a reasonable price.
They start with 6,000 listed companies in India and then sort these to 160-180 companies. Later, they pick 20-25 companies for portfolio after applying various technical filters (Especially price, growth prospects and management quality).
They offer two strategies that are true to their Investment Philosophy
(1) PGIM India Core Equity Portfolio
Believes to invest in good business when they are in the midst of temporary difficulties. On the other hand, if such opportunities arise in a poor business, they are not interested in exploiting it. It selects companies on the basis of quality parameters like high and sustainable return on capital employed, free cash flow, established track record and proven business models.
Based on the objective of avoiding big mistakes, it is designed to deliver wealth over the long term. It recognizes that sustainable wealth can be created in the stock market by (a) buying into businesses that enhance shareholder wealth by generating returns greater than their cost of capital, and (b) not overpaying for such businesses.
How does it work?
Buy stocks of companies those have track record of value creation at time when they are mostly down (inexpensive). It helps maximise returns in long term.
Who should invest?
It is ideal for patient investors interested in long term wealth creation.
|Target Capitalization Range||No bias|
|Target Diversification||20-25 stocks|
|Max. Single Stock Exposure||10%|
|Max. Single Sector Exposure||30%|
|Min. Investment Horizon||3 years|
(2) PGIM India Phoenix Portfolio
This strategy plays the growth story through turnaround and special situations; buying into earnings growth before it is visible, generally offers a price advantage. It invests in small and mid-cap companies with high growth prospects; at least 75% of the portfolio is in these companies.
They select companies where the growth in revenue and profits is expected to accelerate in the future, because of disruptive business ideas, expanded market opportunities, business reorganisations or turnarounds.
- The Strategy seeks to invest in companies that are close to an inflection point in their lifecycle.
- To identify opportunities amongst companies that are experiencing or expected to see an upturn in their respective sectors/businesses.
- The strategy seeks to benefit from structural changes in the economy and/or markets.
At least 75% of the investments will be in these two categories
The investment process consists of
- Screening all possible choices to create an investment universe of acceptable quality
- Further filter the Universe on the basis of growth prospects and management quality
- Construct the portfolio using filters of valuation levels, and sector exposure limits.
Selection of the investment universe (about 350-380 companies)
The investment universe consists of companies that meet the following criteria:
- Average ROE for the last 10 years is greater than 8%
- Positive Operating Cash Flows is more than 6 out of the 10 last years
- Market Cap between Rs. 750 crores to Rs. 20,000 crores
Note – At least 75% of the investment would be made in mid and small cap companies
Buying when the future is “uncertain”
- A stock is available cheap only when the general market does not expect it to do well in the short term
- Therefore, if an investor wishes to “beat the market” he/she should purchase the stock before the market does (i.e., buy when the fear caused by the uncertainty still exists in the minds of most investors)
- If one is confident about the quality of the company and its long-term earnings power, then its short-term price movement should be of less importance
An investment process that seeks to reduce the incidence of these 3 mistakes automatically increases the chances of success
When do they sell a stock?
- When the assumptions with which the stock was purchased in the first place are no longer valid
- When the stock’s price goes well beyond what we think it is worth*
- When for the same perceived level of risk, we spot a superior opportunity*
- When there is a redemption request
Who should invest?
This product is suitable for all equity investors who wish to invest in portfolio of quality companies bought at reasonable prices.
It offers a qualitative diversification compared to the mainline mutual funds. It is suitable for investors with a time horizon of 3 years.
No media comments on their investment strategy.
(1) What would your company do if multiple good business in which the investment was made keep falling and fail to recover at a same time? Are there any portfolio insurance and How much that insurance will compensate the parties involved?
(2) You mentioned average ROI of 10 years greater than 8% for selecting the funds, on what account this rate was considered? Is this the industry benchmark?
(3) Since most business faced (or still facing) downward trend in their growth. What all new opportunities were (or are) created for investment selections. Are any new strategies can we expect to fetch more gains at this time?
Prepared by Prabhat Kumar