How does an active fund manager formulate strategy and allocate towards sectors? Arnav Pandya explains

economictimes.indiatimes.com:

Arnav Pandya, Founder, Moneyeduschool, says “whenever an active fund manager is managing a portfolio, the benchmark is an important component which will come into play. One has to see that within a particular fund how much is the variation the fund manager goes for from the benchmark in trying to earn that extra alpha or generate higher returns.”


The five sectors namely are financial services, consumer discretionaries, IT, healthcare and industrials. Talking about the exposure, the highest, 31% in financial services, consumer is 10%, IT 9% and health and industrial almost 6%. A lot of similarity is seen when an active fund manager frames his strategy for a particular fund which resembles the index or a benchmark. Do you think it is a very common practice or that is how it is supposed to be?
Whenever an active fund manager is managing a portfolio, the benchmark is an important component which will come into play because while the fund manager is trying to beat the benchmark because of the manner in which each of the funds are categorized by the definition of which has been laid down by the Securities and Exchange Board of India (SEBI) plus the fact that we are likely to have the main holdings, which are also part of the benchmark.

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The portfolios in terms of weightages are not very different from what the benchmark is trying to say. For example, when one looks at the overall exposure in the market, financial services companies have the largest weightage in the BSE 500.