Stay put in global portfolio as past US Fed hikes show positive trend in equites: Asheesh Chanda of Kristal.AI

Past hiking cycles have shown that equity markets can continue to do well for extended periods even when the Fed is hiking, as long as the underlying economy remains robust, Asheesh Chanda, Founder & CEO, Kristal.AI – said in an interview with Zeebiz’s Kshitij Anand.

Asheesh has over 15 years of experience in the financial industry and established Kristal.AI in 2016. Prior to founding Kristal.AI, Asheesh managed investment portfolios at KrisCapital, a Singapore-based global macro hedge fund that he co-founded to invest across multiple asset classes. Edited Excerpts:

Q) What a year it has been for Indian equity markets, especially when it comes to investing in international equities. How do you sum up the trend in 2021?

A) While Indian equities have had a phenomenal 2021, more so compared to global markets, it is important to understand that 1 year does not constitute a trend.

US equities have also had a strong year delivering double-digit returns and the gap is narrower if you consider the depreciation of the Rupee vs the dollar.

We believe that international diversification continues to add value from 2 aspects:

a) Geographical diversification which we believe will be more helpful as we navigate through the mid-to-late economic cycle, and

b) Access to niche asset classes and themes that are difficult to access domestically for an Indian investor
 
Q) What should be the strategy of investors amid a potential rise in interest rates by US Fed in 2022?

A) On the global side, we recommend staying invested in equities but focusing on core, mega-cap, and higher-quality names.

While thematic investments have a place in portfolios, we recommend carving out a small budget, so that it doesn’t become the primary driver of the portfolio during stress scenarios.

We will likely see bouts of volatility during such mid-to-late cycle periods, more so in lower quality names but it is important to look through near-term volatility and remain focused on underlying fundamentals.

Within fixed income, while our view is that interest rates grind higher globally, we think having intermediate duration fixed income offers diversification in portfolios, during times of stress.
 
Q) What does the hike mean for equity markets across the globe (US)?

A) Market seems to have already priced in the impact of the US Fed action. With the recent pullback in valuations, we believe that strong underlying corporate fundamentals could continue to drive US equity markets higher, as virus fears abate.

EMs are likely beneficiaries of the recovery in global growth. Cheaper valuations across EMs relative to the US, offset the risks to the EM complex from a hawkish Fed stance.

We continue to maintain a positive bias towards developed market equities and are neutral on China. Past hiking cycles have shown that equity markets can continue to do well for extended periods even when the Fed is hiking, as long as the underlying economy remains robust.
 
Q) What is the kind of money riding on different markets? 

A) Would like to quote the number from UNCTAD. The developed economies saw a significant drop of (58%) in FDI, while Asian economies saw a net increase (4%) in FDI inflows. The global FDI numbers stand at $1530B for the year 20201.
US = $156B
China = $149B
India = $64B
UK = $20B

Q) What is the trend that you see from India – ETFs or stocks? What does the trend suggest for the year 2021?

A) Stocks continue to be the first choice for Indian investors and there is a lack of awareness around ETF among investors as well as the fact that taxation does not benefit ETFs as of today.

At Kristal, we are macro investors and employ ETFs and funds to a large extent. ETFs are cheaper compared to funds and provide diversification against non-market risks.

We believe more and more investors will latch on to this trend of using managed and/or passive strategies going forward.
 
Q) Which are the new stocks apart from FAANG which Indian investors are putting their money into?

A) Tech sector is still the most preferred sector for Indian investors. Beyond FAANG, we see investors seeking exposure in next-generation tech names like Tesla and other EV opportunities, NVIDIA, semiconductor names, cybersecurity names like Crowdstrike, payment companies like Visa, etc.
 
Q) What is the kind of IPOs/new companies that are likely to hit US markets in 2022?

A) The calendar for 2022 looks dotted with Fintech companies with names like Stripe, Klarna, eToro, Chime expected to excite the market.

Many decacorns are hitting the 10-year window, hence expected to provide an exit to their investors in 2022.

Q) Any new products which you plan to start or have started recently?

A) Marketplace for ESOPs is the new product offering by Kristal to augment its Private Market Solution. The offering will be launched in Q1 2022 and will enable many young startups to offer exit options to their employees.
 
Q) What is the trend that you see for sectors like EV, tech as well as blockchain? What is the kind of money that is rising in these sectors? And, any top companies?

A) Sustainable investing and democratization are still strong drivers for investors. Hence investing in EV, clean energy space and blockchain technology will continue to see traction in 2022 as well.

Some of the leading companies that we see finding preference are Tesla, Roku, Square, Zoom, Twilio, Coinbase, Spotify.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)