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Equity Funds BNP Paribas Investment Philosophy

Investment Philosophy

Investment-Philosophy

We believe that "companies create wealth and not markets" and thus the focus is on identifying businesses which can grow earnings at a faster rate for significantly long periods of time. Our in-house investment framework BMV (Business - Management - Valuation) helps us in identifying these companies. Thus, while investing we focus on all aspects of the company viz. quality of business, sustainability of growth, governance and price being paid for the company. All the companies which are part of the scheme portfolio have to pass through each of the BMV filters. And for us, all aspects are important.

In search of companies with superior and sustainable earnings growth with strong management, at reasonable valuations.

Equities

"Companies create wealth, not markets"

Companies-Create-Wealth-Not-Markets

Essentially, our belief is that over the long term, investments made in strong businesses which are run by superior management, deliver consistent and superior returns. Faster growth ensures the upside during good times and superior quality of management (read better corporate governance), protects the downside of an investment during tough times - hence over a cycle these investments generate superior returns.

Business, Management, Valuation (B.M.V.)

Equity

1 BUSINESS
Growth:

  •   Company growing faster than industry, industry growing faster than market
  •   Structural and long-term sustainable growth
  •   Focused and simple to understand

Moat: a sustainable competitive advantage arising from brand franchise, cost advantage, industry structure, technology/patents, distribution, etc.
Change: Positive change in sector, receding competitive intensity

*A sustainable competitive advantage



2 MANAGEMENT
Leadership in:

  •   Competency basis management through market cycles (trend of sales, margins, capital allocation, etc.)
  •   Corporate Governance factors such as interest alignment with minority shareholders, Conduct and govern business with Transparency, Ethics and Accountability, organization structure, track record with respect to all shareholders



3 VALUATION

  •   Cash flow is central to the way we think about a company's value
  •   Valuations: Intrinsic value, DCF (Discounted Cash Flow), Dividend Yield, Operating Cash Yield, etc.
  •   The narrower the 'moat' or weaker the management, the greater is the margin of safety required
  •   Superior risk-reward profile

Fixed Income

Companies-create-wealth-not-markets

Our Investment Philosophy is all about delivering superior risk adjusted returns.

  • At BNP Paribas AMC*, the source for Alpha is a function of our view on Interest Rate and Credit Allocation
  • Forming an Interest Rate view is core to our investment thesis and hence more reliance on Duration Management and Asset Allocation relative to Credit Allocation.
  • We stress on avoiding risks that can lead to erosion of capital and at the same time emphasizing the importance of security selection and portfolio construction.

*BNP Paribas AMC: BNP Paribas Asset Management India Private Limited

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**Basis portfolio of the scheme as on June 30, 2021

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*Investors should consult their financial advisers if in doubt about whether the product is suitable for them

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