‘Staying in the ring, reducing errors can create superior outcomes,’ says Vetri Subramaniam of UTI MF

Vetri Subramaniam, Chief Investment Officer, UTI Mutual Fund, is a no-nonsense fund manager. He was always known for his market acumen- from very early days he earned a reputation for being a serious observer of the market with an eye for detail. That’s why ETMutualFunds decided to speak to Vetri, as he is known in the mutual fund circles, for the series Beating Volatility. The idea was to learn from him how new investors can navigate tricky or volatile phases in the market. “You are going to make errors in investing; it is best to make them early and when you are young-so you have time to learn and course correct. Keep a diary and note down what works for you and what did not – Investing is personal,” says Vetri Subramaniam.
Edited interview.

When did you start your journey in the stock market? Do you recall your initial years in the market?

I started my professional career in investment management in 1994. This was a period of much enthusiasm and excitement in the markets after the economic liberalisation of 1991. The market had just been opened up to foreign investors. As an investor my focus was largely on revenue growth and earnings growth. The outlook for growth was guided solely by excitement over lower penetration levels for almost all products in India. These were the early days of institutional research and company engagement.

What was the first thing you learnt in your initial years in the market?
Access to management, their commentary/guidance and the ability to model company financials in – these were among the many things I wrongly presumed to be my advantage. I am embarrassed to say that I paid very little attention to cash flow generation by companies and return on capital. I was lucky to have several exceptional bosses, mentors and colleagues during that period – they pushed me to develop an independent opinion, shared their own learning experiences with me and allowed me to learn from my mistakes. This has been invaluable.

Which was the first bad phase in the market that you remember clearly? How did you navigate it?
The early part of my investing career was a long cold winter – the market was lower by 23 per cent between June 1994 and April 2003. But it taught me a valuable lesson– companies that allocate capital efficiently and earn a healthy return on capital are more likely to survive and create wealth. I also learnt to differentiate between the top-down perspective of economy/markets and bottom-up stock picking. I could be worried about the economy and market and yet remain invested in a company to reap the benefits. In fact, this schizophrenic ability is key to good investing outcomes.

Can you tell us one mistake that you remember clearly from your initial years? What are your learnings from that mistake?
I could write an encyclopaedia of my mistakes and have already covered a few above! My most memorable mistake has to be selling

soon after it listed based on valuations. I persisted with the mistake for a few years- that is, avoiding it based on valuations. But as I watched their execution skills, delivery of superior growth and RoA, I changed my opinion at a much higher price. I don’t have an accurate measure of the contribution this company has made to returns of the various funds I have managed over 20 years, but its very likely that this single holding has made a disproportionate contribution to Alpha through my professional career. To me the biggest learning is to be willing to change my opinion based on the facts.

You have been in the market for such a long time now. Were there any bad phases that made you lose your nerve? How did you navigate it?
The most important investing lesson for me personally has been about asset allocation. The market meltdown of 2000-01, in which my personal stock portfolio witnessed an 80 per cent drawdown, was a reality check on my risk appetite. Thereafter, securing my financial goals has taken precedence over maximisation of returns. And in taking asset-allocation decisions, there is no better guide than valuations. I have learned to endure raging bullish periods long after I have reduced allocations and grinding bear periods that persisted even after I raised allocations.

How do you see today’s market in the context of your own journey?
This is very different market from when I started my career. In the 90s we were short of data and information to make decisions. My efforts were focussed on filling the gaps. Now we are over informed and overexposed to data and the news cycle. The key today is to separate the signal from the noise. I have trained myself to reduce the incoming noise.

If there is one thing that you would want young investors to learn from your experience, what would it be?
You are going to make errors in investing; it is best to make them early and when you are young-so you have time to learn and course correct. Keep a diary and note down what works for you and what did not – Investing is personal . In the equation of compounding there is too much focus on ‘r- Return’ and not enough on ‘n-Time’. Just staying in the ring and reducing your errors can create superior outcomes. Not doing stupid things is underrated.


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