Relying on research

KNOW YOUR FUND MANAGER

The 'Lehman experience' helped Prateek Agrawal to look at things from a global perspective.

Research is at the core of Prateek Agrawal's investment decisions. Backed by vast experience in equity markets, Agrawal has developed the expertise to take cues from the business environment, understand businesses and spot reasonably valued companies.

He follows a top-down investment strategy. "We take a view on the macro level and screen companies on varied parameters like sectoral outlook, ability to generate profits and liquidity. We run tight portfolios with a focus on liquidity," says this 35-year old research expert who has recently taken over as head-equities, ABN Amro Asset Management.

But what made him pursue research? "Coming from a business background, I was interested in studying businesses and was curious as to what makes some companies superior performers. I was always inclined to get into research," he says.

This academically-inclined electronics engineer from Regional Engineering College, Rourkela, went on to get an MBA in finance from XIM, Bhubaneshwar. Having completed his management programme, he joined SBI Capital Markets in May 1994 as a research analyst.

But during those pre-internet days, organised institutional research was in the nascent stages. "With a small team we had to start most of it from scratch and data collection was a major hassle," he says. He started with the steel sector and later covered metals and auto.

Tenure at SBI Caps
He liked his stint at SBI Caps. "It handled almost 70 per cent of the public issues in India. This gave us a good exposure and helped us understand the way businesses operate at close quarters. Those days were tough but now all the efforts seem to be worth it."

There were other advantages of working for this merchant banker and one of them was an alliance with Lehman Brothers. Agrawal got a chance to acquaint himself with the US major's investment approach which he dubs as 'the Lehman experience'.

"It was a great learning experience and helped me to look at things from a global perspective," he says.

Going Dutch
In May 2004, Agrawal started his stint with ABN Amro as a research analyst.

"In 2004, the company was just being launched in the country. Start-ups attract me, so I opted to be a part of ABN Amro. The company's advantages include an experienced team worldwide which brings in global thought processes," he says.

Agrawal had, over the years, gained considerable experience on advising companies on investments and project finance. He was keen to move on to managing funds.

"Though I was not managing funds technically, I was contributing significant inputs. I took as much ownership of the funds as the fund manager," he says.

Agrawal now manages the ABN Amro Tax Advantage Plan since its inception in December 2005.

Recently, he started managing assets worth Rs 1,092 crore spread across six funds"�ABN Amro Equity Fund, ABN Amro Opportunities Fund, ABN Amro Tax Advantage Fund, ABN Amro Future Leaders Fund, ABN Amro MIP Fund (equity part) and ABN Amro Dividend Yield Fund.

Sectors to watch out for
When asked about his favourite sectors, Agrawal says that the attractiveness of sectors in terms of growth prospects and valuations could be different.

"I am more comfortable with sectors where the markets are playing a prime role rather than those plagued by unnecessary regulatory policies," he says.

At present he is positive on software, engineering, auto, cement, commodities (agri and ferrous) and realty stocks.

"Till date, outsourcing and consumption have been driving demand. Today, India is at the cusp of rapid growth and the capex engine will only accelerate the process," he says.

He believes that super malls are a great business model but is not comfortable with valuations. "One needs to achieve scalability and profitability much faster so as to bargain hard with brands. Moreover, with mega players entering the mall space, cost pressures are likely to eat into margins," he adds.

Equities, the best asset class
Commenting on the recent market correction, Agrawal says that it is a feature of a growth market.

"India is a growth market and not a trading market. We have one of the finest capital markets. If you invest over time and across sectors, you will make substantial profits."

He, however, believes that the retail investor should take the mutual fund route. Justifying this he says, "The past two months have shown that liquidity and diversification have earned a premium. Given the volatility in the markets, mutual funds are safer bets for retail investors."

An Asimov fan
A voracious reader, Agrawal reads everything from business biographies to science fiction to comics. "I love science fiction and Isaac Asimov is my all time favourite."

Although he does not play, he loves watching football and tennis but is not much into cricket. He also loves listening to music and travelling.

"I listen to instrumental and classical music to unwind. I take occasional breaks from my job and go on outings. I have been to a number of tourist destinations in India and abroad." Agrawal wants to spend quality time with his wife and son but complains that more is never enough.