‘Investing in undervalued asset classes is what makes you money’

financialexpress.com:

Hybrid strategies help deliver better risk-adjusted returns as they have cash and can identify undervalued assets to invest in, says S Naren, ED and CIO of ICICI Prudential AMC. In an interview to Siddhant Mishra, he says bulk of the money coming through the SIP route shows investors have been extremely disciplined in how they use mutual funds to create long-term wealth. Excerpts:

With indices hitting an all-time high, how should be the investor behaviour at this point?

Last year, when the markets were lower, the mutual fund (MF) industry received huge inflows. Today, when the markets are touching all-time high, inflows have moderated. Bulk of the money is coming through the SIP route — the optimal way to invest for the long term. It shows investors have been extremely disciplined in the way they use MFs to create long-term wealth. At the same time, the industry has done a good job in popularising SIPs, systematic transfer plans and hybrid categories like the balanced advantage and multi asset.

Despite many of the large cap funds underperforming the benchmark, what has made investors stick to MFs?

There is a role for active management in investing, especially in India. Five years back, the regulator introduced scheme categorisation, which defined the mandate for each category, thereby bringing all offerings in a category on a level-playing field. As long as the market movement is not narrow, there will always be scope for large cap investing through active strategies. Since the scheme categorisation, there have been funds that have outperformed the benchmark.

What has made you a strong proponent of the hybrid category?

The best way to invest for the long term is via hybrid. During March 2020, when the markets tanked, we