Sandeep Bagla, the 37-year old head of fixed income at Principal PNB, talks about his twin passions-bonds and chess. A chess freak, Sandeep Bagla's understanding of bond trends are the outcome of his keen interest in the game of position analysis and long-term strategy. Like in chess where a player has to chalk out strategy and anticipate the sequence of moves, an ability to decipher market signals and predict the trend lines is key to success in the debt markets.
He applied these principles over the twelve years of handling debt portfolios in various capacities at ITC Classic Finance, ICICI Bank, ABN AMRO, Reliance Mutual Fund and Principal PNB.
The game starts off in Kolkata where Bagla got his first break at ITC Classic after his graduation in marketing and finance from XIM, Bhubaneshwar.
The pawn or the knight?
Bagla was new to the game. The L-shaped trot was perhaps unfamiliar and he chose Kolkata, turning down an offer from Mumbai-based SBI Mutual Fund. Bagla admits to the mistake.
"The four-year stint wasn't useful from a professional point of view. A move to Mumbai would have put my career on the fast track," he says.
While he managed SLRs worth Rs 150 crore, it was a shift to Mumbai following the merger of ITC Classic with ICICI that Bagla came into his own. This was the time (1998) when ICICI was aggressively rolling out bonds and mopping up large amounts from the market. Bagla helped launch the ICICI Safety Bonds and conceptualised the AnyTime facility.
"There was an impression at the time that bonds were not liquid but ICICI's vast network of AnyTime centres ensured that these bonds could be transacted (bought or sold) at its centres at any time irrespective of maturity."
Bagla set up the corporate trading desk, where an illiquid market presented opportunities. ICICI would take positions in corporate bonds and eventually sell to investors like mutual funds and pocket the spread.
Support from the flanks
A large part of Bagla's success was due to the progressive and supportive management. "ICICI was not risk averse, had a strong middle management and empowered its dealers while at the same time ensuring that a risk management system with adequate checks was in place."
He identifies three managers""Madhavi Puri Buch and Nachiket Mor of ICICI, and Alok Agarwal and Amitabh Chaturvedi of Reliance Mutual Fund""who helped him to better appreciate the power of execution, planning, vision and the ability to take risks.
ICICI would train its managers and give them tools to ensure that they were aware of bond strategies necessary to tap into the opportunities in a nascent market. Bagla would also learn the basics of market segmentation (tenure, risk and spreads) in bonds and rating of various debt instruments.
"ICICI's credo of being innovative also meant that dealers could look at inter-corporate deposits (ICDs) and commercial papers for the short-term and corporate and institutional bonds across tenures instead of just sticking to the G-secs," he says.
His exposure was however not limited to Indian paper. When he moved to ABN AMRO, he got an opportunity to work in the Asian debt market in Singapore.
"You could short sell the underlying G-sec and take only the credit risk unlike the Indian market where you are forced to take the credit as well as the interest rate risk," he says.
As the head of the asset liability management department, he helped ABN AMRO take on larger positions and underwrite bigger deals. After eight years of handling strategy and execution it was now time to scan the battlefield for new opportunities.
BAGLA'S RECORD
Scheme Performance (%) as on August 17, 2006 |
| At Principal PNB | 1 Year |
| PRINCIPAL Income Fund - STP - Growth | 5.80% |
| PRINCIPAL G Sec - Investment - Growth | 3.93% |
| PRINCIPAL Income Fund - I P - Growth | 5.44% |
| Scheme Performance (%) as on November 30, 2004 |
| At Reliance | 1 Year |
| Reliance G Sec Fund - LTP - Retail - Growth | 5.0213 |
| Reliance Income Fund - Retail - G P - Growth | 2.2244 |
| Reliance Short Term Fund - Growth | 5.0827 |
Retail roulette
Managing other people's money is a different ball game. Says Bagla, "Managing a mutual fund is more like running a marathon; you have to deliver every day of the year."
He was in charge of Reliance Mutual Fund's G-sec, income and the short-term funds whose corpus increased from Rs 3,000 crore when he joined to Rs 10,000 crore when he left. To get a taste of MNC culture, Bagla moved on to Principal PNB, his current employer to manage the fixed income portfolio which has a corpus of Rs 10,000 crore.
"My task here is to look out for the best returns in a short period, be in the top quartile without taking too much risk, identify trends and ride on them." As a fund manager, Bagla has access to market information but what about retail investors?
"They should focus on actively managed funds and move to income funds rather than park their money in cash or liquid funds," he says.
He believes that any increase in interest rates could hurt economic growth. With decent liquidity and inflation under control, Bagla says that interest rates may go down over a period of 3-6 months.
Alternate moves
Quiz him about his career choice and Bagla says that had it not been for the markets, he would have become a film critic. This one-time hack (had a short stint in Sunday, a Kolkata-based weekly before moving on to XIMB) says that movies and fund management have similarities.
"Movies, with the help of a script communicate to the masses and cater to their expectations, while mutual funds conceptualise, market and ensure that the experience with the fund is satisfactory," he says.
With an employer such as Principal which has been consistently rated among the top 100 companies to work for, Bagla gets time to watch movies, try his hand at squash and play the doting father to his six-year old son, Uddeshya.
