Large-Cap Equity: What makes ICICI Pru MF's Anish Tawakley an outlier

ICICI Prudential Bluechip Fund has generated higher returns than its benchmark over the one- and three-year periods by minimising risk and focusing on steady performance

Legendary investor Howard Marks, Oaktree Capital’s co-chairman and co-founder, wrote a memo to his clients in 1990, where he talked about two fund managers. One had done very poorly recently, and said that being a top performer also requires taking risks that can take you to the bottom. The other fund manager noted that he preferred to avoid taking the risk of underperformance and instead only strove to do a little better every year, stating that this eventually makes one a top performer. Marks said he preferred the second approach.

So does Anish Tawakley, deputy chief investment officer (equity), and head of research at ICICI Prudential Asset Management Company, who was influenced by Marks’s letter.

Ensuring steady performance helped him win the Business Standard Fund Manager of the Year 2022 award in the Equity – Large Cap category. The ICICI Prudential Bluechip Fund generated returns nearly two percentage points higher over the one-year period ended December 31, 2022, than its benchmark under Tawakley’s stewardship, even as assets crossed the Rs 35,000 crore-mark.

Even on a three-year basis, his fund’s net asset value (NAV) grew at a compounded annual rate of 16.14 per cent, higher than the benchmark’s 15.48 per cent. In a market where algorithms buy and sell stocks in under a second, his average holding period is over three years.

Tawakley’s risk management is thorough but the approach helped him avoid other fund managers’ mistakes — like the meltdown in start-up and technology stocks. He believes that not every company is like Amazon, which was famously unprofitable for years before becoming a mammoth profit machine. “One Amazon is used to justify...a thousand sins,” he says. 

His outlook for Indian markets is positive. He believes that housing could be a key trigger for the recovery. India may finally be coming out cleaner after a tumultuous 20 years in housing which started with the Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002). This legislation allowed banks to freely lend for homes, since they had a tool for recovering their money, creating unprecedented housing demand.

Around the same time, stock markets began to value real estate companies not on the basis of the houses they built, but the land they owned. A lot of unfinished houses later, the bankruptcy code and the establishment of real-estate regulators has made builders more accountable. This has cleaned up the supply side of housing, similar to how Sarfaesi cleaned up the demand side, says Tawakley. Builders no longer have an incentive for holding on to land, because the stock market no longer values it.

Tawakley believes that a surge in housing driven by these structural changes can also have a positive impact on manufacturing. The number of manufactured goods depends on the size of one’s house — whether its fixtures, air conditioners and other durables, or even textiles, where the size of your wardrobe can determine the number of clothes or shoes you buy.

“We can get a sustained recovery driven by housing and construction. If housing starts off, then that will create domestic demand for manufactured goods,” he says.

Tawakley is also positive on domestic cyclicals like capital goods, some financial-sector companies and cement firms.