Alternative Investment

How Enam AMC’s Jiten Doshi picks stocks

Enam Asset Management Company Pvt. Ltd (Enam AMC) is completing 25 years in October. The asset manager has a single investment philosophy distributed on three platforms: Enam India Core Equity Portfolio, Enam India Diversified Equity Advantage Portfolio and Enam India Equity Portfolio. For its next leg of growth, the company is planning to launch three new products, another portfolio management service (PMS) product, an alternative investment fund (AIF) and an Undertaking for Collective Investment in Transferable Securities (UCITS) to target the retail and mid-market segments.

Jiten Doshi, co-founder and chief investment officer of Enam AMC, talked to Mint about the company’s future plans, market outlook, and the India growth story. Edited excerpts:

Take us through the history of Enam AMC.

We are the asset management arm of the Enam Group. We will complete 25 years on 3 October this year. We have the longest-serving single-manager track record, and we manage over $3.4 billion in assets. We have a domestic PMS, an offshore fund, and an SMA platform for large institutional investors who want to invest in India. We have pioneered Socially Responsible Investing in India. In fact, we are a signatory to the United Nations Principles for Responsible Investment (UN PRI).

What strategies do you have at Enam AMC?

We have a single strategy, which is growth oriented. We have seen almost all the market cycles, beginning from the year 2001. We have a long-term track record of having delivered more than 20% CAGR across all market cycles with about 5% Alpha.

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Could you tell us how you were positioned during the covid crisis?

The pandemic was something new to the world, and several businesses suffered a big blow as they underwent a structural change. During this period, I think many sectors especially service-oriented ones were severely challenged. We also went through several downturns across different industries. During those periods, we did see some shifts in the portfolio, and I think we positioned the portfolio for a big upsurge in the economy. During 2019-20, the Indian economy was already slowing down but in 2020, we could sense a strong recovery towards the end of March 2021. So that’s when we repositioned our portfolio to participate in growth across sectors of home improvement, discretionary consumption, staples and many other industries, where we found a lot more value and high growth.

In terms of clients, you weren’t very aggressive about expanding the number. Has that changed over time?

On the current platform, our average ticket size is in excess of 5 crore, which is one of the highest in the industry. It’s a very specialized service where we do a customized portfolio approach for our clients. So, on the current platforms, we don’t really believe in expanding in numbers, it is more in terms of the AUM per client that grows. So that’s what we are focused on. We are about to enter the mid-market segment with a 50 lakh ticket size PMS that will be launched towards the end of this year in order to ensure broader participation from investors across the country. We want to now offer something where we could encourage participation from the retail and mid-market segments.

What is your expense structure in terms of performance and management fees?

Our management fee varies from 1.5% to 2.5%, depending on the product. And of course, we have special pricing for large ticket separately managed account (SMA) mandates, which we discuss directly with our clients. We are the most friendly PMS as we do not charge any performance fees; we don’t have any lock-in period, and entry or exit loads.

Can you take us through the investment philosophy that you follow when picking stocks?

We look for businesses that are well positioned to capitalize on the emerging growth opportunities across the country. We look for businesses with high-entry barriers and moats, something that allows businesses to sustain earnings growth momentum and bring in more predictability and durability in the business model. Additionally, these businesses should be run by high quality managements that practice the best standards of corporate governance, disclosure and transparency.

India has historically traded at a premium to other emerging markets? Do you think that it will sustain?

I don’t think we are doing a like-to-like comparison when you are comparing India to, let’s say, Brazil or Russia or South Africa. India has a very wide base of very high-quality companies across every sector. Obviously, India will trade at a premium to a predominantly commodity-driven market, which does not have high quality companies. Indian markets in terms of ownership, governance and transparency, are way ahead of many other emerging markets.

India rightly deserves to be at a premium to these markets, given that most of the businesses here generate a very decent return on capital employed (ROCE).

Is there any particular sector that you’re bullish on?

We are very bullish on the financial services sector, which primarily includes all the private sector banks, NBFCs and general insurance. We are also bullish on home improvement and discretionary consumption. Sectors that we basically do believe could come under strain in the period ahead would be the commodity sectors such as metals and oil & gas.

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