Summary of talk by Mr. Srinivas Pulavarti at the CCMRM

 

Mr. Srinivas Pulavarti, Chief Investment Officer, UCLA Investment Company presented his views on portfolio management and global financial markets at the Centre for Capital Markets and Risk Management, IIM-Bangalore, on September 24, 2015.

With over 20 years’ experience in managing portfolios, Mr. Pulavarti provided important perspectives on the flux in global financial markets, quantitative easing in the U.S. and the less-talked-about reasons why phased Q.E. may not yield desired results.

For the benefit of those who could not make it to his talk the other day, some key points from his talk are below:

  1. With hundreds of global investment opportunities available, it is best to keep investment avenues for one’s portfolio, limited. In his words, “for the investment manager, the eleventh alternative is always much less understood than the tenth one.”
  2. The key functions of any investment manager, irrespective of the size of assets under management, are three: where to invest, how much to invest and what stock to invest. Particularly for longer time horizons and large portfolios, clarity of an investment process is critical.
  3. Speaking about the magnitude of endowment funds available to US universities, Mr. Pulavarti pointed to the American practice of philanthropy. Such institutions consciously create a sense of identification for American students with their alma maters. Since they feel part of the family, it becomes easier for successful Americans to contribute generously to universities and schools in which they studied. Indeed, it is preferable for them for their alma mater to benefit from these funds rather than pay huge amounts as taxes to the State. With shrinking State support for academic universities, sources of such funds, supplemented by grants from the US National Institutes of Health and the National Science Foundation, form a large portion of their operating budgets.
  4. There is however considerable variation in the dependence ratios amongst Universities. Dependence ratio is the extent to which the University depends on the annual payout (approximately 5% at all institutions) from the endowment towards its annual expenditure/budget. Dependence ratios can vary from 2% for the University of California to almost 55% at Princeton University.
  5. The success stories of countries such as China and Korea have surprised the world. Mr. Pulavarti believes that this is the outcome of the processes and internal controls they have in place, even for the most minute of activities. Longer times spent on planning saves considerable time spent on execution.
  6. Pulavarti compared the state of Gujarat in India to Korea. He believes that there exist stark similarities between Gujarati’s and Koreans, in that the people are equally industrious, hard-working and business-minded. Seeing where Korea stands now in the global markets, he asks whether Gujarat really fulfilling a similar role as an Indian state?
  7. Freedom of mind is absolutely critical to the efficiency of a fund manager and the success of his fund. It is, therefore, worthwhile to reject grants and endowments from authorities, than allow them to tell you what you must or must not do.

Overall, sitting through Mr. Pulavarti’s talk was enlightening, to say the least. To hear such views from a man who has seen it all, was an experience in itself. He was both extremely clear with his explanations and patient with questions the audience had. Encouraged by the overwhelming response from the audience, in terms of attendance and their enthusiasm throughout the talk, we at the CCMRM intend to bring many more conversations of this kind, in the days to come. Time permitting, Mr. Pulavarti has kindly offered to participate at other events at IIM-B in the future. We remain thankful for his generosity.

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