Silver Date of Analysis: July 2017

The leadership at IDFC Sterling Equity has witnessed multiple changes in the past. Kenneth Andrade helmed this fund from March 2008 till it was taken over by Aniruddha Naha in June 2013.

Naha relinquished his management responsibility when he quit the fund house in March 2016 and subsequently its reins were taken over by Anoop Bhaskar. Andrade was an accomplished manager and the fund had built an impeccable track record under him. He quit the IDFC fund house in September 2015. In our opinion, Bhaskar is an apt replacement for Andrade. Despite the leadership change, there is a continuity in the process.

Like his predecessors, Bhaskar too pays heed to the IISL Nifty Free Float Midcap 100 Index, loosely aligning the portfolio's sector weights with those of the index. Having said that, he does not mind being significantly overweight or underweight in sectors either from a bottom-up basis or macro perspective. Yet, Bhaskar has a distinctive style of investing which he brings to the fore while executing the strategy.

Consequently, the portfolio went through a makeover after he took over the fund to ensure that it is in line with his investment approach. While investing, he looks for companies which have decent amount of promoter holdings, good cash generation, low leverage, and profitability over a cycle. He avoids businesses that show profitability in spurts. Given the fund's small/mid-cap bias, it gives Bhaskar an opportunity to play to his strength.

However, the investment team has witnessed significant turnover in the last few years which is a cause for concern. Except for Bhaskar, the other team members currently lack long-term portfolio management track record, though they have good research experience. Hence there is a key-man risk in Bhaskar.

Nevertheless, IDFC Sterling Equity Fund is well placed under Bhaskar's leadership and we draw conviction from his presence at the helm of the investment function. He is a proven small/mid-cap specialist and under him the fund has the means to outperform the competition over a longer time frame