Kothari is a Senior Investment Manager responsible for Indian Equities Research
and Portfolio Management within Emerging Market Equity team at Pictet Asset
Management, a well-established 212 years old independent asset management
company having headquarters in Geneva, with more than CHF 187bn under
management across equity, fixed income, multi asset and alternative strategies.
They service clients
providing specialist services to manage assets through segregated accounts to
individual investors and some of the world’s largest pension funds, sovereign
wealth funds, intermediaries and financial institutions.
Asset Management is housing 150 employees at 3 floors of a glass building in
Moor house. Pictet has been an organically grown company since 1805 following a
partnership model which never got listed, never got acquired by anyone. Only
recently in 2014, Pictet changed to corporate partnership model of limited
liability structure and started publishing annual reports to enable efficient
management of business in an international set up.
management division is mainly divided into Long Only funds and Absolute return
funds. Long Only is further broadly divided into Equities and Fixed Income.
Within Equities its split based on geography, developed and emerging markets. There
is another special sector within Pictet’s Equities space called Thematic
Equities which I would like to talk about briefly as I found it very
interesting. From last 20 years, the department has been improving Socially
Responsible Investments (SRI) and has become a pioneer in thematic investment.
recognising megatrends changing the world and investing in such themes, Pictet
has been able to deliver positive returns over long term. There is a huge
investment in water, agriculture, biotech, health, digital, Robotics and many
more. Robotic fund was launched
2 years back which is already a $5bn product now.
to Emerging markets division, one of the sub groups is Asia X Japan which
Prashant is part of. Asia X Japan team manages the Asia X Japan Equities, India
Equities and Greater China Equities (China, Taiwan & Hong Kong) funds.
Prashant mainly works on Indian Equities but also has been working on Asia X
Japan from last 6-9 months. Along with the team here in London, there is
another part of Asia X Japan team located in Hong Kong with 2 people out there closely
monitoring and managing the Hong Kong, China and Taiwan market.
day starts in the office at 8:30 am when he prepares for the morning meeting
which starts at 9am attended by Asia X Japan team where in Prashant’s team and
Hong Kong team discuss the news/events, results of interested companies, the
trades being booked to manage portfolio and mutually exchange ideas to get
awareness of what’s happening is respective markets. At 9:30 am, one of the
team members in Prashant’s team would join the Emerging Markets call where in
Emerging Markets assembles to exchange ideas of what was discussed in Asia X
Japan group and other emerging markets group. This information is leveraged by EAFE
(Europe, Australia, Far East) team as well who tracks Taiwan, Honk Kong as it
overlaps with the countries which Asia X Japan tracks too. So, with this kind
of information flow, rather than everyone spending time on researching various
markets, mutual exchange of ideas helps manage time efficiently.
the formal meeting cycle, Prashant’s work is divided into different categories
of activities. He has a great track record of concentrated portfolios around
20-30 names. As a portfolio manager, he manages the portfolio by checking if
long-term mix of assets is still consistent meeting the investment objective
and balance risk against performance. He is very supportive of concentrated
positions as he feels that bigger positions return sizable alpha. His portfolio
is overweight on private sector which is more efficient compared to public
sector. He doesn’t have any exposure in telecom as he foresees the returns not
going above cost of capital in near future; no investments in cement stocks and
neither in energy stocks because of low returns due to government interference.
The main criteria Prashant considers while selecting a business to be in his
portfolio is whether it’s returns are above cost of capital and whether
business management shows evidence of integrity.
research hat too, Prashant goes through research reports/compendiums published
daily by sell side brokerages like CLSA, JP Morgan and UBS in different
countries. Based on different views/perspectives obtained from different sell
side brokers, he would do further research of his own to accordingly manage the
stocks in his portfolio. If he finds any interesting new ideas, he would
request the sell side sales broker to arrange a meeting with their specialist
analysts to understand the stock in more detail. With frequent interaction,
sell side sales person is familiar with the needs of the buy side analysts and
hence is able to put right experienced sell side analysts in touch. Prashant
mentions that in some cases sell side analyst have such vast experience in
specific sector that their insight helps in making investment decisions. Also,
it helps in avoiding reinventing the wheel of doing research all over again. Prashant
requests for a concise investment thesis from sell side brokers along with the
models used for forecasting, assumptions made etc. Following discussions with
sell side analysts from different companies, it gives him different
perspectives of looking into the investment. Besides, Prashant would do
research of his own by reading company reports, speak to in house analysts who
may have analysed the same company for other assets liked fixed income, build his
own models to figure out key drivers, check how DCF model reacts to different
scenarios, change assumptions to see how growth estimations change etc. After
thorough analysis, decision is made whether to put forward the trade or monitor
the situation for some more time until price drops below certain threshold or
may be even scrap the idea because it too expensive or risky. Sometimes it may
take few days or months to get that comfort factor of putting forward the
trade. Prashant highlights that there have been cases where in after extensive
research over weeks, when the decision was almost made to book trade, some
useful insight came up which changed the view towards company completely and
had to scrap the investment idea. Thus, he says that it’s very difficult to
correlate efforts to output.
the usual day to day work, he also meets corporate CEO, CFO, investor relations
to get an idea of how they manage business, what are their growth prospects,
what is their opinion about how competent they are which would help convert
impressions made out of the meeting into assumptions and numbers for valuation
working day usually finishes around 6:00 pm which allows him to have a
reasonable work-life balance. His view is that if one is working longer hours, they
are not managing time effectively. One needs to switch off their mind to enable
it to think out of the box and understand what’s happening otherwise in the
about key challenges faced, first thing which popped up in Prashant’s mind was
information management. With so much of information flowing around daily in the
form of emails, research reports from specialist brokers, ideas gathered,
internal/external data, news flow followed by 300-500 emails, the biggest
challenge Prashant faces is managing the key information efficiently. With this
comes the effective management of time as well. He overcomes these problems by
concentrating only on key drivers on stocks he is working on and have a plan
for the week on what he is going to concentrate on rather than getting
distracted with information overload. Over a period of time with experience he
has been able to distinguish between what is noise and what is signal which
needs to be pursued further.
challenge he generally faces is that the money managers come during the wrong
time in the economic cycle. Clients want to pull out the money when market is
down and invest when its good but expensive. For instance, during
demonetisation in India, Prashant had to convince the clients a lot not to pull
out money but to invest. Ideally, he says that it’s the best time to invest
money when market is down, of course having evaluated the risk and know when to
conclude, I asked Prashant what advice he would give for someone who would want
to join asset management industry. His view is maths is easy to learn and
anyone with finance background can do valuation but the art of choosing right
assumptions to forecast becomes better by experience. With investments being a
continuously evolving space, he admits that he has done his share of mistakes
in the past which has helped him shape into a better asset manager now.
Investing as a profession is not a zero-mistake profession. He says that treat
each investment as an experiment. Whether the outcome is positive or negative,
as far you learn from the experience, mind set remains balanced.