I didn't want to quit when the scorecard was weak: HDFC AMC's Prashant Jain

In an interview with Samie Modak, the storied CIO of HDFC Asset Management Company, Prashant Jain, explains the rationale behind quitting now and his future plans

After the first 13 years of his cricketing career, Sachin Tendulkar hit a peak average of 58 in Tests. Over the next seven years, his average fell to 54, leading to a clamour for his retirement. The batting legend, however, was not done yet. He hit good form once again, improving his average to 56.5 at the end of 2009. PRASHANT JAIN, considered by many as the Tendulkar of fund management, has decided to step down as the chief investment officer (CIO) of HDFC Asset Management Company (AMC). His performance trajectory has been similar to Tendulkar’s — peak performance, followed by a dip in form, and then swansong. However, Tendulkar’s average once again dipped between 2009 and 2013 — the year he retired — as he went after his 100th century, which would remain elusive for long. Jain, on the other hand, has decided to move on a high. In an interview with Samie Modak, Jain explains the rationale behind quitting now and his future plans. Edited excerpts:

You have surprised everyone by your decision to leave HDFC AMC…

It has been a fairly long innings, nearly 31 years overall – 29 years with the same funds, and 19 with HDFC AMC. I didn’t want to quit when the scorecard was weak. The performance has now come back strongly across funds and across time periods – both with respect to the peer group and benchmarks. I wanted to hand over the baton when there would be alpha, else I would have carried the guilt that one was not able to justify the fees. My schemes had a skew towards corporate banks and the power sector. Power demand collapsed and the fear of bad loans resurfaced when a lockdown was imposed. This impacted performance materially. As things have normalised, performance has returned strongly.

You quitting HDFC AMC will leave a big void…

I don’t think so. The business is in a good shape – our performance is strong across the entire range of equity funds and across managers. Leadership transition is behind us – we are making good progress in most areas. The investment team is strong – in fact, it is the best in my 31 years. We have added several members with excellent credentials – broad-based performance is a vindication of this. I could be biased, but I strongly feel this team is second to none in the country.

What are your plans?

After having worked for HDFC, I don’t want to work for any other organisation. At this stage in life, I am keen to limit my responsibility to unit holders and customers, not shareholders of a business. I don’t have big plans. I will start something of my own, will spend more time with my family, and focus on health and spirituality, which I like.

Warren Buffet made the most of his wealth after 60. You are 55. There still is a long road ahead…

Wealth is not an end in itself. It is a means to an end. I know many who are happy with less wealth, and vice versa. I don’t want to fall into that trap. I will focus on customers who are aligned to my thinking. My investing philosophy and process are well understood.

Will you change your investment style?

I continue to learn, and hopefully improve, with time. At the same time, the core approach is simple, sustainable and proven over 30 years through multiple economic and market cycles. Hence, it stays the same – focus on strong and reasonably valued businesses, stay diversified and remain patient. At times, this tests patience, but end results tend to be worth the wait.

Is active-fund management becoming challenging, especially given the increasing size of funds?

Hopefully this issue is settled, now that you cannot have both size and performance – with the performance of several of our large funds. Here, one has to remember that an active fund manager has to generate around two per cent extra returns just to cover expenses and match the returns of the benchmark. That is quite a challenge. That’s why a lot of active fund managers struggle. I feel both active and passive will do well and grow. The share of active schemes will be decided by alpha, the holy grail of investing.