No chill without volatility: Prateek Agrawal on playing the long game in India's new market era

Economic Times

3 days ago

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In an insightful episode of the ETMarkets webinar—known for bringing front-row insights from the biggest minds in investing—Prateek Agrawal, Managing Director and CEO of Motilal Oswal Asset Management Company (MOAMC), shared his perspectives on wealth creation in today's market. He offered an in-depth look at how the fund house prepares Indian investors for the future through its focused, growth-oriented investment strategy. Moderated by Sridhar Janada, the conversation explored the philosophy underpinning MOAMC's high-performing funds, its unique position in the mutual fund landscape, and the mindset investors—especially Gen Z—need to cultivate in an age of compounding, volatility, and rapid market shifts.Setting the context, Agrawal noted MOAMC's emergence as a differentiated player in India's vibrant mutual fund industry. 'We are a young AMC and, you know, being young, you learn from people who have been there before and have done it all. So we did that,' he reflected. Yet the company has not shied away from bold bets. 'We have a few firsts to our credit… focused, high-conviction investing, which we think is a very, very premium portfolio construct.'The firm's philosophy draws heavily from the QGLP (Quality, Growth, Longevity, Price) framework pioneered by Motilal Oswal's co-founder Ramdeo Agrawal. 'This is one house that is very unique in alignment of interest… a lot of the firm's money is invested in our funds. So while we have crossed ₹1.5 lakh crore AUM, over ₹8,000 crore may be house money,' said Agrawal, highlighting how skin in the game deepens accountability.While much of MOAMC's growth has been attributed to performance, Agrawal believes consistent communication plays an equally important role. 'Performance may be the first thing that makes people look at us… but what we are also trying to do at the same time is to explain what we are doing.'MOAMC's equity-only strategy is by design, not default. 'We run funds which are focused on high conviction, but at the same time very different from the index. Our tracking error is very high—some funds have over 90% deviation from the index. We are not somebody you should think is a consistent, close-to-index performer.'He added that for investors seeking more predictable outcomes, MOAMC offers passive alternatives. 'If you want close to index performance… Passive funds are a cheaper way of attaining the same goals. For actively managed funds, we think our constructs are very different. Come to us for growth. If you can digest volatility, we are good for you.'The tagline 'High Quality, High Growth' is backed by rigorous fund management principles. 'It comes from the QGLP philosophy of the house… ultimately markets follow earnings growth,' explained Agrawal. 'If the business grows in sales, more in profits, even better in cash flows—and does that over a long period of time, clearly the value of the business has increased.'MOAMC's strategy is to identify narrow pockets of high-growth opportunity across the Indian economy. 'We are a medium-sized house. Our funds are small. It is possible for us to position ourselves in the nooks and corners of the market which offer this kind of growth,' he said, citing themes like electronic manufacturing, renewables, new tech, luxury, and capital markets as key areas of investment.Discussing recent fund performance, Agrawal offered a transparent view: 'FlexiCap is ranked one now for three years… LMC is ranked one for all periods of its existence… Multicap has had a stellar performance.'However, he reiterated that outperformance comes with inherent volatility. 'Don't expect close to index numbers from us. We are not built for that.' Instead, MOAMC encourages investors to pair growth-focused funds with value strategies to balance their portfolios over time.This duality—embracing volatility while delivering alpha—is at the core of MOAMC's communication strategy. 'This is the time for alpha… We say money is being made this way; this is how we invest. There is probably a higher predictability of performance.'Looking ahead, Agrawal was bullish on both the Indian economy and mutual fund penetration. 'Equities as an asset class have very low penetration in India… below 5%. As per capita income grows, it converts a country of savers into a country of investors. That journey has started.'He believes mutual fund growth will outpace GDP growth in the coming years. 'The fund industry will grow significantly faster than the economy itself… We are very positive about the outlook. This is just the beginning.'In closing, Agrawal delivered a compelling message to young investors: 'Over a long period of time, what makes you money is the ability of the business to keep compounding earnings… focus on quality in combo with growth.'He advised caution against relying on external funding for business expansion. 'If you are financing your growth through internal accruals, the predictability and sustainability of that growth is very high… The purest sense is that the organic growth you generate is constrained by your return on invested capital.'Longevity, he added, is key. 'Longevity is super important. You start with 'L' in QGLP—spaces, which will afford you longevity of growth. One-period growth is of very little use.'For Motilal Oswal AMC, future-proof investing is about more than just chasing returns. It is about discipline, conviction, and clarity of purpose—anchored in a philosophy that sees volatility not as risk, but as opportunity.As Agrawal summed up: 'Alpha is here to stay… and we believe the time for growth investing has come.'