Nippon India Growth Fund completes 30 phenomenal years of wealth creation, with an NAV that today stands above Rs.4000 – that’s a 400 bagger in 30 yrs! To put this in perspective, the index has delivered 20x return in the last 30 years vs Nippon India Growth Fund’s 400x returns! In CAGR terms, that’s 22% compounded over 30 years.
Over 3000 investors – supported by over 200 distributors– have stayed through this remarkable 30 year journey and reaped the incredible wealth created by this iconic fund. Saugata has met some of these investors and he says the single biggest factor that has kept them invested through the roller coaster ride of markets in these 3 decades has been trust in the brand.
Strong process orientation, high level of expertise of fund managers who managed this fund and a continuous effort to strengthen processes as markets evolved including fund casing that was put in place 5 years ago have all contributed to this fund’s strong performance track record.
A big lesson for all investors is to understand that this 400x return in 30 years came with its fair share of negative return periods: 9 years out of 30 years saw this fund posting negative returns; out of its 360 months (30 yrs) history, the fund delivered -5% or more in 50 months; 126 months out of 360 months saw this fund delivering negative returns.
It is your ability to withstand these down periods through long term conviction, that enables you to reap this kind of compounded returns over long periods of time. This is where investor resilience, distributor conviction and fund house communication and engagement have to all come together to help investors stay invested through rough patches and win big in the long run.
One initiative that differentiates successful distributors and helps them create successful investors is their focus on fund selection and creating a short list of funds based on different attributes – which is what forms the basis of their fund recommendations.
Short listed funds are tracked diligently, performance is reviewed at least annually and fund houses are engaged with especially when fund performance dips. Savvy distributors tend to differentiate underperformance into cyclical factors (style out of favour etc) vs structural factors (things that have changed at a more fundamental level which causes loss of confidence in the fund).
Guidance to ride through down cycles vs agility to exit funds when structural issues are noticed is what has enabled successful distributors to create so many successful investors.
While the benefits of long term compounding are real and the lessons are timeless, numbers are not timeless. A fund that delivered 22% CAGR over the last 30 years does not imply that it can replicate this performance over the next 30 – for the simple fact that the economy has transitioned from a high inflation – high interest rate economy to one with much lower trajectory of inflation and interest rates.
Rather than getting caught up on an absolute number, distributors should guide investors to look at real returns over time.
Saugata says one lesson we can all learn from this fund’s journey is the importance of expanding one’s own canvas to make it really big. Whether it is your business plans or the plans you make for your clients –think in decades not in years – and you will see how you can grow much beyond your own imagination.