‘You can never prepare enough for a six-sigma event’

Everybody one meets in the MF industry these days says “I’m fine”. But when Amandeep S Chopra, president, head- fixed income, UTI Mutual Fund, tells that, you tend to believe. His is one of the only two fund houses that have managed to grow their assets in November.

Amandeep has been with the behemoth since 1994. He joined the company soon after his MBA from FMS-Delhi University, and has stuck to it through booms, busts and the dry October. He shares some secrets of the trade with N Sundaresha Subramanian. Excerpts:

Has your equity background helped in your current profile?
The foundation in equity helps you to analyse a company better.

So, even while managing debt, we are able to take slightly more forward looking view on companies. Since we know how various industry cycles work and how corporates perform over these cycles, one can spot declines in profitability.


If an equity manager sees fall in EPS, he just sells the stock. But I (debt guy) don’t do that immediately. However, if I see severity in decline and feel the servicing capacity is going to decline, I may look to exit.

This is something which I have ended up building because I had an equity background. Not many managers have that.

Did you take such a call on real estate before the trouble started?
When we went into real estate, we laid down some strict guidelines. We were relatively conservative and invested only in top-tier companies. Moreover, we made sure that all investments made were sufficiently secured with collaterals. If we are investing Rs 100 crore, we made sure the company gave at least Rs 175 crore.

What happened with your FMPs?
None of the UTI FMPs got into trouble. They were inherently structured as a closed-ended product. Our exit loads were aligned with that. We did not have periods where we had no exit loads or low exit loads so that investors could use it as an arbitrage. We had high exit loads 2-3%, when industry was giving 0.5%.

Was that good enough?
That was good enough. In case of some redemptions, we had to sell some assets. Whatever loss we booked was made up by the exit load. The indicative return of remaining investors was protected.

What is your learning from the six- sigma event (liquidity crisis) in October?
The biggest learning is that you can never prepare yourself enough for a six-sigma event. Thankfully our investment philosophy and style are more conservative than our peers. That has helped in the turmoil. We believe in portfolio diversification and stay away from extraordinary risks.

Do you see such events repeating itself?
You can only prepare to some extent. The degree of deviation is difficult to predict. Unfortunately, the level of integration of financial markets and the level of leverage was never really understood by the markets.

What is your view on interest rates and, based on that, which investments would pay off in the next one year?
We are positive on rates and cautious on credit. Globally there is a slowdown. Some of that will be reflected here.

Slowing economies are rate-positive. You are seeing lot of measures from central banks, which are cutting rates. All this is helped by inflation (globally and domestically) coming down.

These rate cuts will favour long-term funds. Gilt funds and bond funds are the products which will do well on a one-year perspective.

What kind of return can one expect in these products?
From a year perspective, if you think the yield curve will shift down by about 50 basis points, then UTI Gilt Fund can typically give you a return of about 12.5%-13%. It all depends on what duration you are investing.

n_subramanian@dnaindia.net