PGIM India Phoenix Portfolio

“Regression to the mean is the most powerful law in financial physics: Periods of above-average performance are inevitably followed by below-average returns, and bad times inevitably set the stage for surprisingly good performance.”— Jason Zweig, Wall Street Journal

Why Invest in Small and Mid Caps ?

Small and Mid caps have the potential to outperform Large caps
Small and Mid caps outperformed large caps 51% and 93% of the times, respectively, on a 5-year rolling basis
5 Years Rolling Returns Analysis Midcap Smallcap
Number of Observations 2329 2329
% of Observations beating Large Cap returns 93.40% 51.00%
Maximum outperformance 11.40% 11.40%
Maximum underperformance -2.00% -7.40%

Data representation is for Feb 2014 to Feb 2023 period Source: MFIE

The above chart is for understanding purpose only. Past performance may or may not sustain in the future. Mid caps are represented by Nifty Midcap 150 TRI, Small caps by Nifty Smallcap 250 TRI and Large caps by Nifty 50 TRI

Some themes have better representation in Small/Mid Cap space

  • Software Product Development Companies:

    India is seeing emergence of IT product companies offering distinguished products and services from their larger counterparts.
  • Discretionary Retail:

    This segment is a beneficiary of rising per capita GDP and higher discretionary spends. Many sub segments find no representation in large caps like footwear, clothing brands, food and retail chain, etc.
  • Hospitality:

    Increasing incomes will lead to people travelling more and holidaying. The need for hotel rooms & airlines will grow manifold.
  • Real Estate:

    Housing will be a long-term story in India. Post RERA, the transparency has gone up and overtime the competition will come down.
  • Home Building:

    As a corollary to the real estate sector, as the sector takes off, there will be a good demand of tiles, sanitary ware, plywood etc. There is very little representation of large caps in the segment.
  • Chemicals:

    The sector is seeing a lot of vibrancy in terms of growth and profitability as China clamps down on pollution. Lots of business is flowing to India

PGIM India Phoenix Portfolio - Proposition

  • Focus on buying businesses that are close to the inflection in their lifecycle either due to cyclical or structural reasons.
  • Concentrated portfolio of Small and Mid Cap companies.
  • Low overlap with the mainstream products.
  • Long term holdings with low churn.

Investment Process : Quality Filters

Note: Minimum 75% of the portfolio at all times follows the above-mentioned process. The fund manager may exercise discretion up to 25% of the portfolio for including financial companies, high conviction ideas or companies which meet most of the above criteria but fail on a single parameter.

Investment Process : Multi-Stage Filters

The portfolio manager looks for:

    - The ability of the company to grow its sales and profits greater than industry average, over the next 3-5 years

    - The ability of the company to do this without consistently resorting to additional external funding

    - The track record of the management in capital allocation

Portfolio Sell Discipline

Investment Approach

Portfolio Name PGIM India Phoenix
Investment objective The objective of the portfolio is to generate capital appreciation over the long term by investing in quality Mid and Small Cap Indian companies.
Strategy Equity
Types of Securities All funds would be predominantly invested in listed equity and equity related securities.
Basis of Selection The central theme of the product is that the Portfolio Manager would choose stocks of companies that, in his assessment, are close to an inflection point in their lifecycle either due to a cyclical or structural changes. The Phoenix Portfolio, as the name suggests, would concentrate on companies whose financial and operational performance (profit margins, market share etc.) at the time of investment would be below the long-term average performance displayed by the company.
Asset allocation At least 75% of the portfolio would be invested in the shares of Mid and small Cap companies. Pending deployment of funds of the Portfolio in securities in terms of the investment objective, the funds of the Portfolio may be parked in short term deposits of scheduled commercial banks or in the liquid and debt schemes of PGIM India Mutual Fund.
Investment Horizon Markets usually take time to spot value, hence it is advisable for investors to be invested for at least 3 years.
Risk associated Please refer Risk Factor document
Benchmark Index NIFTY 50 TRI


Disclaimers and Risk Factors: PGIM India Asset Management Private Limited is registered with SEBI (Portfolio Managers) Regulations, 1993 [as repealed and superseded by SEBI (Portfolio Managers) Regulations, 2020]. This Document is for information purpose only. This Document and the Information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/ schemes or any other financial products/investment products (collectively “Products”) mentioned in this Document or an attempt to influence the opinion or behavior of the Investors/Recipients. Any use of the information contained herein for investment related decisions by the Investors/ Recipients is at their sole discretion & risk. Please read the Disclosure Document and the agreement along with the related documents carefully before investing. Investments in Products are subject to market risks, various micro and macro factors and forces affecting the capital markets and include price fluctuation risks. There is no assurance or guarantee/ warranty that the objectives of any of the Products will be achieved. The investments may not be suited to all categories of Investors/ Recipients. Investors/ Recipients must make their own investment decisions based on their own specific investment objectives, their financial position and using such independent professional advisors, as they believe necessary, before investing in such Products. The Client can avail the Portfolio Management Services directly from the Portfolio Manager without any recourse to distributors.

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