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Prashant Jain reminds you of the Energizer bunny. Sure, he looks nothing like the lovable character straight out of the long-running television commercial. But his nine-year winning streak at HDFC Mutual Fund is the talk of the mutual fund industry. And why not? With a corpus of Rs. 86,600 crore, it is the 800-pound gorilla of the business. Which is why, every move its 42-year old executive director and chief investment manager makes is followed actively by investors, analysts, the media and even those in his peer group.Two of his funds, HDFC Equity and HDFC Top 200 have delivered returns of 28% over the last decade and are, without doubt, the best-run funds in the India. He has followed his convictions even if it meant underperforming in the short-term–like he did in 2007. Be that as it may, he has consistently emerged tops

Your background? How did you end up in such an offbeat, unconventional and unusual career?

You’ve got to believe this: Prashant Jain never planned to be a fund manager. He was just at the right place at the right time.

Most of his growing up days were spent in small towns of Uttar Pradesh, where his father worked with the state government. He completed his engineering from IIT Kanpur before moving to IIM, Bangalore. He joined SBI Caps from campus and was moved to its mutual fund department. He spent time with the fixed income team, rose to become a deputy manager and started assisting the equities portfolio manager.

What was your career path after SBI Caps?

In 1991, when the mutual fund business was still yet to take off, he met Chandresh Nigam and E.A. Sundaram, then his colleagues, now great friends.

Once the private sector opened up in 1994, the three shifted to 20th Century Mutual Fund. A couple of years later, Zurich Financial Services (ZFS) bought the fund over and they were part of a new dispensation which became Zurich Mutual fund. This lasted until ITC Threadneedle was bought out by Zurich Mutual fund where they all continued. It was an interesting time. Indian mutual funds were still to evolve and the trio was still figuring out their investment philosophies.

They operated from the SBS Business Center in Cuffe Parade, close to Hotel President. This place was owned by Frank Simoes, a well-known advertising personality who had moved his office to Goa. He built the business center like a Victorian house. And some of the best fund managers in India worked closely with each other under the same roof.

Proximity to each other gave them the confidence to challenge the dominant logic in their nascent industry. For instance, this was the time the IT industry was the flavor of the season. In 1999, Infosys was the darling of the stock market and trading at a price to earnings multiple in excess of 200. Fund managers like Bharat Shah who was handled Birla Advantage fund, then the biggest fund in the country, with assets of roughly Rs. 1,000 crore, believed the segment still had more upward momentum left in it.

But the boys at Zurich had their doubts and they sold IT stocks from their portfolio. There’s this interesting anecdote of how one of the analysts at the fund wanted the three to meet Mohandas Pai then the CFO at Infosys. After much persuasion, they relented. The analyst was hoping Pai could convince these men how wrong they were. But they stuck to their guns–that the sector would grow, but the stocks were out of whack with fundamentals.

In 2000, IT stocks tanked on the market. “It was different those days. We sold off IT before anybody could ever think of it,” says Chandresh Nigam, now the chief investment officer at Axis Mutual Fund.

All the funds they managed delivered returns in the region of 25% on an annual basis for five years till 2003 when HDFC Mutual Fund took over Zurich.

That was when Jain took over as head of equities and Nigam moved to ICICI prudential. Sundaram was placed as head of the portfolio management business at HDFC mutual fund. He left very recently.

What are the key capabilities of a fund manager?

This was Jain’s breakout period. He knew he had to deliver returns. Friends from his days at IIM, Bangalore talk of his legendary cool. “I think that he is a man of conviction and not rigid in his investment philosophy,” says a former batch mate.

At HDFC Mutual Fund, Jain worked closely with Sanjoy Bhattacharyya who was then heading the investment team. Bhattacharyya, who now runs his own investment firm, Fortuna Capital says, “I have the highest regard for Prashant because of his disciplined and rational approach to investing which has led to superior risk adjusted returns. He has a great nose for buying growth at “value” prices. I think he is the closest thing to Anthony Bolton in India.” Bolton managed the Fidelity Special Situations fund for 28 years and returned 19.5% as against the market which delivered 13.5% in the same period. In 2006, his fund was split into two because it was considered too big to manage. Assets under management then were in excess of $12 billion.

It was the largest open-ended fund in the U.K. and Fidelity was left with no choice but to split the fund into U.K. Special Situation fund and Global special situation fund. This is exactly the trade-off Jain may face soon.

Jain says he has no investing heroes. From time to time, he does get compared to Peter Lynch or Bill Miller though. He admits he has read up on Warren Buffet and John Bogle and that he has a lot to learn from them, but doesn’t follow anybody in particular. For all practical purposes, he prefers on-the-ground research: Meet companies and look for disparities. Once he spots them, move for the kill.

For instance, in 2007, he figured HDFC Bank was valued as much as some leading non-banking finance companies (NBFC). That seemed like an obvious disparity to him. Either the bank was undervalued or he had entirely missed something in finance companies.

His gut told him HDFC Bank, given its potential and growth rate was clearly undervalued.

Because he was part of HDFC Bank Mutual Fund, he wasn’t allowed to buy HDFC Bank stock. But it strengthened his resolve that the banking sector was a great buy. “India is a savers economy. People put their money in banks. Banks can never run out of fashion. They are the biggest credit distributors for businesses. I started buying banks because I was very sure of their growth rate,” he says. He was damned right.

There have been bumps along the way as well. Between June 2007 and Jan 2008, HDFC Top 200 underperformed the markets. Why? Because his fund managers missed the real estate and utilities boom. Jain admits he stayed away from real estate because he did not understand the business. Why, you ask him again. Because, he says, he buys only into businesses he understands well and real estate don’t figure in that. And that while he likes growth and quality, he wouldn’t overpay for growth.