AMC Speak

New head of fixed income with a brand new team

Pankaj Sharma, Head of Fixed Income, DSP BlackRock

20th June 2016

In a nutshell

Pankaj Sharma makes a transition from heading risk and quantitative analysis at DSP Blackrock to heading the fixed income unit - a transition which he explains is not uncommon in the Blackrock world, given the critical role of the RQA unit in portfolio construction.

DSP Blackrock has hired two specialists - one for the ultra short term (liquid fund) category and one for duration strategies. With specialists in place, a sharp focus on delivering market competitive performance, and backed by Blackrock's risk processes, Pankaj is now aiming to win market share for DSP Blackrock that he firmly believes his fund house deserves in the fixed income space.

WF: At the outset Pankaj, heartiest congratulations and all the very best for the new role at DSP BlackRock!

Pankaj Sharma : Thanks a lot, I am looking forward to this new challenge after having worked for the firm for almost 13 years now.

WF: It's a very interesting transition - from a risk and product oriented role into a fund management role, as head of fixed income. Can you please take us through this transition - from an organization context as well as personally for you?

Pankaj Sharma : This might be look a little different within our industry in India, but when you understand the risk function at BlackRock, you will be able to appreciate this transition a lot better. At BlackRock, we have an independent function called Risk and Quantitative Analysis, which plays a key role in the overall portfolio construction process. Transitions from this unit into fund management are not uncommon in BlackRock - in fact the Head of Investments for Asia Pacific is also a person who made the transition from RQA to Investments.

In my previous assignment heading risk and quantitative analysis, I was very actively involved in the fixed income side, as credit research and credit risk were anyway under my supervision. In fact, the entire investment risk oversight was also with me. Its just that it happened from outside, I have now moved inside.

And it might be a bit surprising for lot of people but actually I come from a background where I have managed money. I worked for Citi for ten years, in multiple markets. I worked in India, Singapore and in US looking after the Latin American market. I have experience in 3 market factors which is the FX, local currency interest rates and the US dollar rates in the local markets because unlike India, in most of the countries outside India, US dollar is an acceptable currency as they have convertibility. I have managed substantial sized balance sheets and I would say fixed income business within our MF business in India is somewhat akin to a balance sheet management function.

Then of course is the fact that having worked with DSP BlackRock for 13 years and having a stable career with a firm which is known worldwide for asset management capabilities, I have to be 100% sure that I can do that, only then will I take the responsibility.

WF: You also have a brand new team; you hired two key people to help you with the fixed income fund management.

Pankaj Sharma : Our focus has been to strengthen our fixed income delivery capabilities, and to enable this, we have hired two specialists - one on the cash side and the other on the duration side. The cash side is largely an institutional business, and we clearly are looking for higher market share here. There is a lot of heavy lifting to be done here - substantial in and outflows happen on a daily basis, and you need a specialist with experience in this segment. Kedar Karnik joins us from Axis AMC, where he has gained exactly this experience. On the duration side, we have hired Vikram Chopra from L&T AMC, who brings with him good experience in managing duration strategy based funds.

I think we are now very well equipped to give our investors a healthy performance from our range of fixed income funds.

WF: On performance, your fixed income funds haven't done very well - especially in the short and ultra short term categories. Are there any structural constraints in terms of risk or processes that inhibit a more competitive performance or do you now see your team going forward being able to deliver market competitive performance?

Pankaj Sharma : Good question. In the ultra short term space, the entire range of returns from the top to 4th quartile is within a 10-15 bps range. Now, in the ultra short term category, the biggest risk one runs is really the liquidity risk, not interest rate risk or credit risk. So, how one balances optimally between maintaining liquidity and earning healthier returns is the key dynamic. If you look at the category today, while liquid funds are allowed to invest upto 91 days, average maturity of portfolios in the industry varies between 30-35 days to 60 days, depending upon the time of the year. I don't think there are any structural constraints for us in delivering a market competitive performance - we now have a specialist in place for this segment, and our aim will be to be high second quartile on a consistent basis. We are not the ones who will look to shoot the daylights off the performance charts, but we will aim for a consistent healthy performance going forward.

WF: Are you looking at changing any of your current processes for fixed income funds management now?

Pankaj Sharma : The only change that happens now is that credit research moves inside as part of the investment team. However investment risk oversight remains outside and we have a new head of risk and quantitative analysis who is very experienced, we have people in the risk team who are very well versed with how the investment risk has to be looked at. The way we slice and dice the risk on fixed income or equity side is perhaps very different from the way many other people look at it. We have the benefit of having access to BlackRock's risk philosophy, which I think is unique.

At the end of the day, one has to understand that this is actually a simple business, and as long as we do things correctly, we will head in the right direction in terms of delivering good performance. Yes, this is a relative game - unlike a bank where it's an absolute game. The objective in a relative game is to work to be above median on a consistent basis - and that's what we will aim to do.

Share this article