All about AIG India Equity Fund

The investment objective of the Scheme is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities including equity derivatives.

However, there can be no assurance that the investment objective of the scheme will be realized as actual market movements may be at variance with anticipated trends.
*Source: Offer Document

AIG Global Asset Management Company (India) Private Limited (AGAMC) is among the more recent entrants in the Indian mutual fund industry and AIG India Equity Fund (AIEF) is its maiden offering. The fund is an open-ended diversified equity fund, which aims to generate long-term capital appreciation by investing in equities and related instruments.

In line with the investment philosophy of AIG Global Investment Group (AIGGIG), AIEF will pursue an actively-managed investment approach with the flexibility to invest in stocks from across market segments (large cap, mid cap, small cap) and sectors. Hence, akin to opportunities funds, AIEF will have the flexibility to shift its monies from non-performing segments/sectors, to the ones that are performing or likely to perform over time.

• AIG India Equity Fund 

Also, the fund will embrace both, the growth and value styles of investing. In growth style of investing, investments are made in well-managed companies that are fairly valued with a view that they are likely to perform even better going forward. On the other hand, in value investing, investments are made in fundamentally strong companies that are undervalued (temporarily), with the view that they will achieve their fair value going forward.

The AMC (asset management company) has indicated that subject to regulations, the sponsor, the Trustee and/or their associates as also the AMC itself, may invest in the fund directly or indirectly during the NFO (new fund offer) period and/or on an ongoing basis. At Personalfn we have always maintained that the disclosures made regarding the AMC's and/or the fund manager's investment in their own funds can prove to be a confidence-building measure for investors. In the long run, such a move could help the fund house gain the investor's trust and establish its credibility.

Although, AGAMC has an accomplished Chief Investment Officer (for Equities) in the form of Tushar Pradhan (who in his tenure at HDFC Mutual Fund was managing well-established funds like HDFC Capital Builder and HDFC Long-Term Advantage Fund), the AMC espouses the team-based, process-driven investment approach. Such an approach makes the AMC relatively less dependent on a star fund manager as the AMC's investment processes take precedence over an individual's investment style. So the AMC, and more importantly the investors are relatively unaffected in the event of the fund manager's departure from the AMC.

Although AIG (American International Group, Inc.) is among the largest financial services groups in the world, it is relatively new to the fund management business in the Indian context. In our view, investors will be better off investing in an existing, well-managed opportunities fund like DSP ML Opportunities (38.5% CAGR over 3-Yr and 46.8% CAGR over 5-Yr), which has an established track record over the long-term. Since AIGGIG has yet to make its presence felt in the domestic fund management industry (in terms of performance), investors should first evaluate its investment approach and processes over a longer time frame of 3-5 years across market cycles (particularly the downturns), before committing money to the fund house.

The fund is mandated to invest between 80%-100% of its assets in equity and related instruments. Also it can invest upto 20% of assets in debt and money market instruments.

AIGGIG's investment process for equities draws upon a theme that all companies follow a multi stage growth model. Hence, the key is to identify them at relatively advantageous valuations, given their particular stage of growth (this has shades of the value style of investing).

Besides investing in stocks from across market segments and sectors (depending on the fund manager's view and market conditions), the fund manager may employ certain derivative strategies as well.

Mr. Tushar Pradhan is Chief Investment Officer - Equities with AGAMC. He holds an MBA degree from the University of Hartford, USA. Before Joining AGAMC, he was associated with HDFC Asset Management Company (July 2000 - December 2006) as Senior Fund Manager. He has also worked with HDFC Limited (April 1995 - June 2000), where he handled various investment advisory functions in the treasury department.

With regards to its fluid investment strategy, AIEF should be well-placed to benefit from investment opportunities arising across market segments and sectors. This, along with the AMC's investment processes can enable the fund to achieve a stable performance over the long-term.