HDFC Tax Saver Fund

• Investment Style: Large Growth
• Investment Process: A bottom-up approach to scout for quality stocks, with a long-term orientation
• Fund Manager: Vinay Kulkarni
• Vinay Kulkarni is an experienced and competent manager who is well-ingrained into the HDFC investment philosophy and has a reasonably strong track record.

The investment process is key to our favourable view here: Kulkarni plies a multi-cap approach, investing roughly 70% in large caps and the remaining in small/mid-caps. Like all managers at HDFC Asset Management Company, he places a lot of emphasis on understanding the business and has an inherent quality bias while investing. His portfolio holdings typically span a two- to three-year investment horizon. However, it isn't uncommon for stocks to feature in the portfolio for significantly longer time frames.

We think Kulkarni's focus on the long-term strength of a business is a positive and it complements the broader style of investing followed by the investment team at the AMC. While Kulkarni considers the opportunity cost of holding a stock over the long term, he does not tend to exit stocks solely based on valuations. Kulkarni also takes large stock and sector bets, often against the grain. We believe this is linked to the research-intensive approach and the caliber of the investment team, which helps pull off such a strategy. Overall, we are fairly impressed with his investment style and solid execution of the investment process. We also note that the process is well-defined and repeatable.

That said, certain risks associated with the investment process need to be highlighted. Kulkarni's sizeable high conviction bets can result in some underperformance over the short term. Nevertheless, we believe that over longer time frames when markets experience a full cycle, the manager's investment style and expertise will hold the fund in good stead.

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