Earlier this year, DSP Mutual Fund documented some investment frameworks on how their small and mid-cap funds, as well as the equity funds are managed. The central idea being that the frameworks are more important as a determinant of consistency and adherence to the core investment mandate and principles of a fund, which in turn, would be of benefit to investors.
To discuss this in detail CNBC-TV18's Sumaira Abidi spoke with Kalpen Parekh, President of DSP MF.
Talking about the importance of framework to a fund Parekh said, “A framework is nothing but a guiding post in a world which is so dynamic, changing at a much faster pace and huge information explosion about companies, market, rates, currencies and economy how do you respond to so much of data and so much of information towards achieving the objective of generating long-term alpha for investors is where the role of a framework will becomes important.”
He further added, “What does the framework do? It says that these are the principles that we believe could generate long-term alpha. Once those principles are identified then you actually put that in your framework and then at any point in time whenever a decision has to be made with new data, new parameters evolving every day, every month, every quarter you just look back at the framework and see if it fits in the framework. If the answer is yes, you accordingly align the portfolio.”
According to him, framework is extremely important and so every fund has a framework because otherwise most fund managers would not have been able to consistently generate alpha.
Talking about the rationale for investors being aware of the frameworks, he said, in periods when there is volatility, uncertainty an investor should be aware of the style in which his fund manager or portfolio manager is taking investment decisions and should know if the fund manager is sticking to that style.
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