White Oak has launched its maiden mutual fund. The company says that its expertise is in active fund management, and hence will only launch active funds at least in the foreseeable future. The company's philosophy is to buy good businesses at attractive values. Prateek Pant, WhiteOak's Chief Business Officer tells MintGenie in an interview that there are a lot of pockets of undiscovered values that lie within the small and mid-cap space irrespective of the macro environment. And they believe that the long-term wealth can be created by discovering values in this space.
Edited Excerpts:
Can you tell us something about the WhiteOak Capital Flexicap Fund and why did you decide to launch an active fund?
There are primarily three reasons for this. First, WhiteOak AMC is one of the unique AMCs led by investment manager Prashant Khemka who doesn’t have any other businesses. We do not have any broking company, banking, distribution licence or corporate house background. This is a licence given by SEBI to a professional investment manager (Mr Khemka) to set up an AMC. The DNA of organisation is that of investment management company.
Second. Our philosophy is to buy businesses at attractive values. We don’t do macro calls or top-down views of market.
Our belief is to outperform the index. We believe there are a lot of pockets of undiscovered values that lie within the small and mid-cap space irrespective of the macro environment. We believe longer term wealth could be created by discovering values in this space.
Finally, the group per se has been managing flexi cap strategies both domestically and internationally and has more than ₹40,000 crore of equity assets.
As the market is not doing great, do you think it would have been better to launch a passive fund scheme instead of an active one?
Our belief is in the area of active fund management. We have a 35-member team of active fund managers and our strength is within active management space. It’s impossible to time the market and impossible to know if this is the good market or bad market. What you know is there are always opportunities in every market which exists as long as we are buying good businesses at attractive values.
Is there a particular investment strategy or mechanism that will be unique for this fund scheme?
As part of our strategy, we typically run balanced portfolios. We buy cyclical and counter-cyclical. Our strategies tend to be across market caps, styles and sectors without any biases in any area. Irrespective of market cycles, our strategies have been able to generate consistent returns outperforming benchmarks over a long period of time. We don’t have any biases in the way we construct our portfolios.
Is there any particular reason for choosing July to launch the scheme when SEBI has just lifted its restriction on new fund offers after a gap of three months?
We had filed and received the approval in April itself. Subsequently in the wake of the restrictions on the launch of new fund offers, we had to defer our plans. We have a track record in the alternate business i.e., PMS business. We need to now create our track record in the mutual funds. The earlier we go to market and launch a fund, the earlier we will be able to create our track record so that a large number of retail investors can participate in our funds.
Does WhiteOak plan to launch new funds in the coming months?
We have filed and got approvals for five different funds. We are starting with a flexi-cap fund. We look forward to launching a mid-cap fund, then there is a large cap tax saver, and a large, and a mid-cap.
The sixth fund for which we have filed our application is for emerging markets fund. In fact, we will be the first Indian asset management company to have its own team that runs the emerging fund.
The fund has been launched in the European market, and the one we will launch in India will be feeder fund giving the same underlying exposure which European investors will have to emerging markets. But this will happen once RBI lifts its limits which are currently in force on AMCs to launch international funds.
So, we will have six funds over a period of next seven to eight months.
The latest AMFI data shows that inflow to index funds has spiked by 27 percent in June and inflow to equity mutual fund investors declined by 16 percent. The data suggests that even prior to this, passive funds drew more interest among investors. So, in all this backdrop, are you sure about investors’ interest in this active fund scheme?
There is a space for every category of funds. Overall, these are percentages on very small basis which are there. But when you look at the data of active funds, it is on a large base. The overall share keeps on increasing of all categories – whether it is active category or passive. The overall allocation to equity for Indian investors is still 10 percent of GDP or something. The scope for investors to take exposure to this asset class is still tremendous whether they do it through active management or passive management. There is a room for all styles and all categories.
For someone like us, our stated strategy is to be an active manager because we have the capability. The team is founded by one of the strongest proponents of active fund management i.e., Prashant Khemka. We are not here to sell products to increase AUM but to provide active management services to our investors so that we can outperform the benchmark. We will only be launching active funds in the foreseeable future.
When the nifty index has declined nearly 15 percent since its peak on October 18 last year, what is your outlook and expectation from the market?
We don’t take macro calls in constructing portfolios but we are always aware of the events that are happening. There have been external factors that are influencing the markets and these include disruption of supply chain because of Ukraine war and spiralling energy prices that led to inflation and tightening of rates by the Fed.
FIIs have pulled out a lot of money from emerging markets and India is one of them. This has led to appreciation of dollar versus a lot of currencies in the world. In fact, the rupee has strengthened against most of other currencies such as euro, yen and pound but because dollar has appreciated against currencies, rupee also appears to have depreciated against the dollar.
We see the green-shoots of very strong revival on corporate earnings. For our portfolio companies, we can see 15-20 percent earnings growth for the next financial year which we have not seen in more than a decade. We are also seeing very strong revival of demand across sectors which could have very solid earnings impact. Domestic liquidity also continues to be strong. Almost ₹25,000-30,000 crore is coming through mutual funds, EPFO, NPS and insurance allocations. There is a tug of war between inflow through domestic liquidity and outflows on the FIIs side.
Over the next few months, you will see strong revival in markets. If index has corrected 15 percent, some of the very good value companies have corrected significantly more. So, you could see pickups coming back in sectors such as IT, financials, consumers, and pockets of healthcare.
