Baroda BNP Paribas BAF completes 5 years with an impressive 13%+ CAGR over 5 years, putting it among the top 3 in the category over a 5year period.
Sanjay believes their proprietary asset allocation model has been a big differentiator, enabling the fund to capture 86% of market upside while significantly protecting downside in drawdowns with its nimble allocation decisions. Active bets in equity and debt have also contributed to alpha.
Interestingly, the fund has outperformed its back-tested data models by over 250 bps, giving Sanjay and his team the confidence that they are on the right track with this BAF.
The equity component is overweight small caps (67% large caps, 20% midcaps and 13% small caps), signifying the fund house’s bullishness on this segment, which led to their recent launch of a small cap fund.
Sanjay says in his 32 years in the market, he has never seen capital goods companies enjoying 4-5-6 year growth visibility the way they are witnessing now. He retains his bullishness in this space even as he shuffles his bets in the BFSI space and auto space while keeping overall sector allocations about the same.
Prashant manages the debt component actively, focusing both on accrual as well as duration. Focus on accrual has resulted in calibrated risks into the AA space in search of higher yields. Duration can vary between 1to 3 or even 4 years, based on interest rate outlook. He keeps the portfolio liquid to ensure nimbleness and ability to realign quickly based on changing market conditions.