AU Small enters Jefferies’ India portfolio, CAMS removed: Chris Wood explains why

The latest revision has raised the weight of banking in the portfolio to 35%. Just last week, Wood added food delivery platform Zomato and SBI Life to long-only India portfolio.

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The latest GREED and fear note has revealed that Christopher Wood, the global head of equities of Jefferies has recently made changes to his investment portfolio. He has initiated an investment in AU Small Finance Bank, assigning it a 3 percent weightage. Simultaneously, Wood has decided to remove his investment in Computer Age Management Services. As a result, the lending sector’s weighting in his portfolio has increased to 35 percent.

Last week, Wood added food delivery platform Zomato to three long-only portfolios and SBI Life Insurance  to one. The term ‘long’ market mean buying stocks and ‘short’ means selling stocks (if you do not own a stock and want to benefit from a stock falling, you can sell ‘short’ by borrowing in the market and then buying back to close your trade. Long-only portfolios are thus portfolio constructs where the fund manager’s strategy is restricted to making money by buying stocks first, and not trying to make money when stock are falling. Wood’s additions were accommodated by removing HDFC Life and Standard Chartered, and by cutting investments in JD.com and Alibaba.

The removal of Computer Age Management Services came just after a week when Wood  highlighted in his note that India’s asset management story is the most promising domestic asset management story globally.

“It might seem odd to remove Computer Age Management Services which is such a long-term play on the development of the asset management industry,” Wood said. “Still, GREED & fear has discovered this week that the mutual fund industry faces regulatory headwinds which, if implemented, will increasingly damage the profits of what is a clear success story,” Wood wrote.

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According to GREED & fear, the banking and finance companies, collectively referred to as the lending sectors, make up approximately 36 percent of the Nifty 50 index, whereas they account for only 24 percent of the MSCI India index. As a result, from the perspective of domestic fund managers who evaluate their performance against the Nifty, GREED & fear’s long-only India portfolio is considered underweight in the lending sectors, despite being overweight in the Asia ex-Japan and global long-only portfolios, the note said.

Within the portfolios, the Indian lending sector holds a significant position, representing 32% of the India long-only portfolio, 19% of the Asia ex-Japan long-only portfolio, and 14% of the global portfolio. These allocations contrast with the benchmark weightings for the lending sector, which stand at 3.9% in the MSCI AC Asia ex-Japan Index and 0.37% in the MSCI AC World Index, GREED & fear note added.

MF fees not excessive, should be left to market forces: Jefferies’ Chris Woods: Read More