The 10 Most Valuable Portfolio Management Service Providersin 2018

www.insightssuccess.in September 2018

Industry watch Portfolio Management ServicesA comparative Analysis with Mutual Funds

Expert Views Investment Portfolios – An Undisputed Way to Create Wealth

10

The

Most Valuable

PORTFOLIO MANAGEMENT

Service Providers in 2018

Editorial Social scientists say that the current generation is experiencing the best of times possible in the history of humanity. Everyone has an equal opportunity to earn independently in a networked business ecosystem through investment where information flows freely. In India, Portfolio Management as an industry is still evolving because people at large still prefer other means of investment over stock exchange for wealth creation. Advancements in technology and policy support by the government generate a very favorable environment for the common investor to invest in the stock market. The role of Portfolio Management Services providers is fundamental to propagate the culture of investment in India.

They often seek help from professional portfolio managers to create wealth for them. A Power of Attorney can be given by the client to the investment manager to take all the decisions related to buying and selling on his behalf. Such Discretionary Decision Making can be a great relief for the investors so that they can concentrate on what is important for them like managing their own business.

Being able to lead a stress-free and socially active life is also an added advantage.

The wise investment advisors traditionally provide two golden rules worth noting for wealth creation. Rule # 1: Never Lose Money, Rule # 2: Never Forget Rule #1.

Every PMS provider has its own philosophy and logic behind investments. Wealth creation strategies usually revolve around the theme of intrinsic value enhancement for the investor. They resort to all kinds of methods to reduce the risk and maximize the returns. The asset allocation should be based on individual needs rather than the market trends and personal life goals acquire more weight.

Wealth Creation Strategies for Sophisticated Investors

Optimal diversification is one of the most effective strategies for the assets whose correlation with one another is not perfectly positive. Currently, complex algorithms run on advanced computer systems to find the ideal correlation between them. Construction of the investment portfolio intends to prevent the damage to financial well-being by protecting the capital.

Recently, the artificial intelligence (AI) and trading robots have made the life of investment managers more peaceful. As machines rely on real-time data to make effective decisions, a lack of reliable data makes it difficult to deploy the AI-based systems beyond the trading platforms. Most prevalent use of AI is in key areas like portfolio management, shorter trading, and settlement times.

Many investors fall in the trap of the idea called ‘Beat the Market’. What really matters is how the portfolio performs over a long period of time. Too short of a time horizon causes investors to focus on factors other than the basic valuation and disregard their investment principles. An experienced portfolio manager can differentiate between the real valuations and speculative pricing. The margin of safety is the difference between the fundamental or intrinsic value in such an investment and the current price of the stocks.

Learning from the mistakes early is a crucial step and ‘Failing fast’ strategy can be good for beginners in rebalancing the investment portfolio without losing a fortune.

All advisors suggest keeping a watch on the news regarding the company stocks and act only if the core reasoning behind the investment is changed. As Benjamin Franklin said – ‘An investment in knowledge pays the best interest.’ We go a step further by saying that - if that knowledge is about investment itself then it leads to wealth creation.

D at ta T aw ar e Datta Taware

Editor-in-Chief Pooja M. Bansal Senior Editor Shraddha Deshpande Managing Editor Rajarshi Chatterjee Executive Editor Datta Taware Co-Editors Anmol, Sneha, Shweta Art & Design Director Amol Kamble Co-designer Priyanka Rajage Picture Editor Alex Noel Art Editor Sapana , Shweta A Visualiser Shweta Shinde Business Development Manager Akansha Garewal Marketing Manager Dhruv Apte Business Development Executives Rutuja, Joan, Shraddha Research Analyst David Circulation Manager Vivek Bangade Database Management Prashant Chevale Technology Consultant Swapnil Patil sales@insightssuccess.com

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CONTENTS INTERVIEW WITH INSIGHTS SUCCESS

28 10

IDBI Investment Banking and Financial Services Company Providing a Wide Gamut of Financial Products and Services

Expert’s View New Generation Companies Creating Wealth through Innovation and Disruptive Strategies

Articles Industry watch

22 16

Portfolio Management ServicesA comparative Analysis with Mutual Funds

Expert Views Care Portfolio Managers Dedicated Portfolio Manager with 100% variable fees

36

Investment Portfolios – An Undisputed Way to Create Wealth

Alfaccurate Advisors

20

Best Fund Managers Outperforming the Market with Low Risk

Dynamic Equities Enhancing Investor Returns through Education and Technology Tools

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26

Equitree Capital Advisors Earning Alpha Returns for Investors through Emerging Companies

QED Capital Demonstrating Consistent Performance for PMS Clients

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Sixth Sense Ventures

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SMC Investments and Advisors Enabling Wealth Preservation and Enhancement with Optimized Returns

A Smart Value Creator Fund for Indian Opportunities in Consumer Brands

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Most

10 Valuable

The

PORTFOLIO Management Service Providers in 2018 Portfolio Managers: Minimizing Risks and Maximizing Returns

P

ortfolio Management Service providers are becoming a necessity as Indians are getting richer. The millionaires are on the rise in India and looking for safe heavens which can grow the valuations of their investment.

Portfolio management services have been in high demand. The number of clients has increased from around 96 thousand to around 1.34 lakhs in past one year. According to data available with the market regulators, total ‘Assets Under Management’ (AUM) of portfolio managers has increased by almost twelve percent in recent years to almost 15 lakh crore by August end, mainly on account of the growth in the number of clients.

There are many professional advisory firms which provide advice and also undertake actual tasks of investing like creating a suitable portfolio on behalf of a client. They manage the funds of the clients as per their goals and many of them have the reputation of giving very high returns compared to the stock market. Recently, the development of technology platforms has a massive impact on the time spent with clients, business development and ultimately their ability to generate revenue with reduced risk exposure. The business models are undergoing a transformation with advanced technology so as to satisfy the necessities of their clients’ portfolios.

About the Project We are listing the top portfolio management service providers who are expert in the field and are well known for their customer-centric services. Entitled by “The 10 Most Valuable Portfolio Management Service Providers in 2018” this issue highlights the prominent names from the portfolio management space. This list of portfolio management service providers is short but comprehensive. We have included the information about the founders as well as a variety of products and services offered by them. The project also includes the articles from the editorial teams and guest editors on Portfolio management and current industry trends.

The article titled ‘Portfolio Management Services - A Comparative Analysis with Mutual Funds’ is included in this edition. Another article is titled as ‘New Generation Businesses – Creating Wealth through Innovation and Disruptive Strategies’ which is written by Mr. Deven Choksey, the Promoter of KRChoksey Group of companies.

We have included the major brands as explained below such as Dynamic Equities Pvt. Ltd. which is a SEBI registered investment advisor and stockbroker, a leading financial services provider in the Equity markets in India, with the membership of NSE, BSE & FPSB India. QED Capital Advisors LLP was included as a Limited Liability Partnership firm and serves as a boutique asset management firm catering to young mass affluent and HNI Clients and provide simple to understand investment products. Equitree Capital Advisors is an investment firm focused on listed small and micro-cap emerging businesses with bright prospects and strong management whose full potential is yet to realize in the market. We also included the Sixth Sense Ventures which is a venture capital firm specializing in growth capital investments in the consumer domain largely in Startups and SMEs. SMC Investments and Advisors Limited provide investment, portfolio and wealth management solutions across a wide range of asset classes in India.

With markets entering in a turbulent phase, our readers will definitely find this information valuable for them. We wish all investors risk-free and rewarding investments ahead!

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Most

10 Valuable

The

PORTFOLIO Management Service Providers in 2018 Company Name

Management

Brief

Alchemy Capital Management Pvt. Ltd. alchemycapital.com

Lashit Sanghvi Co-Founder & Whole-Time Director

Alchemy Capital Management is currently one of the largest Portfolio Managers in the country with superior experience and best in class services.

Alfaccurate Advisors Pvt. Ltd. alfaccurate.com

D. K. Aggarwal Chairman & MD

AlfAccurate Advisors (AAA) is one of the leading Portfolio Management Service (PMS) firms. It is known for its unbiased investment advice and the brand is trusted by corporate and institutional investors.

Dynamic Equities Pvt. Ltd. dynamiclevels.com

Shailesh Saraf Managing Director

Dynamic Equities Pvt. Ltd. is a SEBI registered investment advisor and stockbroker, a leading financial services provider in the Equity markets in India, with the membership of NSE, BSE & FPSB India.

Equitree Capital Advisors Ltd. equitreecapital.com

Pawan Bharaddia & Ssuneet Kabra Founders

Equitree Capital is an investment firm focused on listed small and micro-cap emerging businesses with bright prospects and strong management whose full potential is yet to realize in the market.

Geojit Financial Services Ltd. geojit.com

Jones George Vice President & Chief Digital Officer

Geojit is a leading investment services company in India with a growing presence in the Middle East offering a wide portfolio of savings and investment solutions via multichannel services.

Multi-act Equity Consultancy Pvt. Ltd. multi-act.com

Jayakumar Babu President

It is a Portfolio Management Service provider to various HNIs and also an advisory for overseas entities that are FII’s, QFIs serving wealthy families, family business owners, sophisticated investors and capital intermediaries around the globe.

QED Capital Advisors LLP qedcap.com

Anish Teli Managing Partner & Principal Officer

QED Capital Advisors LLP is a Limited Liability Partnership firm and serves as a boutique asset management firm catering to young mass affluent and HNI Clients and provide simple to understand investment products.

Sixth Sense Venture Advisors LLP sixth-sense.in

Nikhil Vora Founder & Chief Executive Officer

Sixth Sense Ventures is a venture capital firm specializing in growth capital investments in the consumer domain largely in Startups and SMEs.

SMC Investments And Advisors Ltd. smcinvestments.co.in

D. K. Aggarwal Chairman & Managing Director

SMC Investments and Advisors Limited provides investment, portfolio and wealth management solutions across a wide range of asset classes in India.

Tamohara Investment Managers Pvt. Ltd. tamohara.net

Sanjay Panicker Partner & Portfolio Manager

Tamohara is SEBI registered Portfolio Management Company which creates and invests in benchmark and market cap agnostic equity portfolios, focused on long-term value creation by investing early in potential businesses.

Nagaraj Garla CEO

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September 2018|

Interview With Insights Success

IDBI

Investment Banking and Financial Services Company Providing a Wide Gamut of Financial Products and Services

I

n an interview with Insights Success, Nagaraj Garla, CEO of IDBI Capital Markets & Securities Limited gave some insightful answers highlighting the influences made by his company to take IDBI Capital to a new level.

1. Kindly brief us about your company.

IDBI Capital Markets & Securities Limited is a wholly owned subsidiary of IDBI Bank Limited and offers to its clients a bouquet of financial services.

Broadly IDBI Capital provides services in three major areas – Investment Banking, Institutional and Retail Broking and Portfolio Management Services.

2. Please tell us something about your Founder/CEO and his/her contribution towards the company and the industry.

IDBI Capital is a wholly owned subsidiary of IDBI Bank Limited. IDBI Bank Ltd. has inherited a rich legacy from its predecessor entity - Industrial Development Bank of India – which was an apex Development Financial Institution (DFI) in the realm of industry from 1964 to 2004. As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market.

In October 2004, the erstwhile IDBI was converted into a banking company – IDBI Ltd. – to undertake the entire gamut of banking activities

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while continuing to play its secular DFI role. IDBI Bank Ltd., as a full service universal bank, provides a wide gamut of financial products and services encompassing deposits, loans, payment services and investment solutions.

3. How emerging technologies are changing the portfolio and wealth management industry?

Technological tools such as Robo advisory are expected to take off in mid market segment of wealth management where the client is seeking a larger bouquet of products with lower fees. The key differentiation here will be financial advice at reasonable cost. However at the high end of the market, it will be relationship and product driven. Technology will also play an important role in terms of providing complex products & strategies to this affluent class effectively.

Another important role that emerging technological tools will play is offering number of product innovations.

Having said this, the crux of Wealth management business is people - relationship managers, that cannot be ignored at all, irrespective of any kind of technological enhancements.

4. How new economic and taxation policies of Govt. and the global trade scenario are transforming the portfolio and wealth management industry?

With liberal economic policies & reforms that the government has undertaken over last few years, the rise in entrepreneurship is expected to raise India to the third largest number of billionaires in five to seven years as per some market reports. E.g. the acquisition of Flipkart

by US based retail giant Walmart has created hundreds of millionaires. Such buyouts are music to the portfolio & wealth management industry.

The recent initiatives like demonetization drove millionaires further away from physical assets into financial assets. Such kind of reforms have only helped

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the industry to channelize the investible surplus in an organized manner. In today’s dynamic world of global & domestic economic environment, the job of a Wealth Manager/portfolio manager becomes more important to provide right asset allocation to clients to optimize the returns.

The Startup India Stand up India initiative of the Government is also likely to create more entrepreneurs.

5. Explain the industry challenges in terms of current trends?

The main challenge in wealth management industry is the quality & maturity of relationship/portfolio manager.

People with a sincere approach to handhold the clients in their journey of wealth creation as well as wealth preservation, instead of looking short term, objective of revenue maximization is the need of the hour. Since it is a people centric industry, retaining good talent of wealth managers/portfolio managers is very important criterion.

The markets conditions have thrust negative returns upon most Portfolio Managers. Attracting investments at this point of time, although it is the best time for investing is a challenge.

6. What are the unique factors of your company?

Explain in brief the purpose behind starting and the success story of your company?

The USP of the IDBI Capital is provision of varied services under one roof backed by the IDBI Brand that endorses its credibility and trustworthiness.

The Company provides capital market services, M&A and PE, syndication and advisory services for resolution of stressed assets.

The Company had an experience of handling more corporate debt restructuring mandates of approximately Rs. 2 lakh crores. The Company recently launched the Retail PMS to focus on IDBI Bank Retail Customers.

IDBI Capital has bagged the Award for “Best Investment Banking & Securities Services Company, 2017” from

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International Brand Consulting Corporation (IBC), USA, the “Financial Services Brand of the Decade – 2018” by Herald Global – ERTC Media; “Asia’s Dream Company to work for – Financial Services” by World HRD Congress and “Asia’s Most Trusted Company Award”

by IBC (USA) and has also been assessed as the “Most Improved Broking House-2017” by Asia Money.

7. Kindly describe about the products and services of your company.

In the Investment Banking space, we provide services in Capital Market transactions, M&A and PE and syndication of debt. On the Institutional front IDBI Capital is empaneled with leading Institutions as a preferred broker. We also service a vast network of retail and HNI customers. IDBI Capital also has a strong research team which has a coverage of varied sectors. We have alliances with leading banks to extend the reach of our broking services across India.

IDBI Capital recently launched portfolio management service IDBI Focus 20:20 strategy. It is targeted to cater to HNI/UHNI clients to generate superior returns over medium to long term by identifying and investing in quality companies with good management track record, fair valuations with reasonable margin of safety.

8. What are the future challenges in your industry and how are you preparing the company for that?

• Competition from the organized and unorganized players is a challenge. To remain prepared to face competition we continue to focus on large deals with a value proposition • Technology obsolescence is a major challenge. However rather than view it as a threat or challenge we look at it as an opportunity for advancement and continue to innovate and focus on digital upgradation. We provide a platform which serves differentiated customer experiences • Providing advisory services without funding/cutting a cheque is also a challenge. However we have diversified our business sufficiently and our also in the process of launching the Defence and Aerospace Fund.

9. Kindly provide a quote which describes your company in the best way.

I find the great thing in this world is not so much where we stand, as in what direction we are moving: To reach the port of heaven, we must sail sometimes with the wind and sometimes against it - but we must sail, and not drift, nor lie at anchor.

-Oliver Wendell Holmes, Sr.

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Interview With Insights Success

CARE PORTFOLIO

MANAGERS I

n an interview with Insights Success, CA Arpit Shah, Co-founder of Care Portfolio Managers Pvt Ltd gave some insightful answers highlighting the influences made by his company to take Sunday Mattresses to a new level.

1. Kindly brief us about your company.

Ans. Care Portfolio Managers Pvt Ltd or “CarePMS” is a SEBI registered portfolio manager with seven years of track record. We invest in public listed companies in India. We have a bottom-up, stock specific approach. Our basic selection criteria revolve around (i) growth potential; (ii)management capabilities; (iii) strong financials; (iv) attractive valuation; and (v) niche player with leadership position. We invest with time horizon of atleast 10-12 quarters.

2. Please tell us something about your Founder/CEO and his/her contribution towards the company and the industry.

Ans. I graduated from Narsee Monjee College, completed my qualification as a Chartered Accountant and was certain about making acareer in equities. I decided to enterprise into stock broking but quickly realized that forming an asset management company was the way ahead. But I wanted 100% dedication, so I quit my stock broking business and started Care Portfolio Managers Pvt Ltd -- with PMS as single line of business. I was joined by my mentor and our fund manager CA Jayant Mamania, CA Harmukh Gangar and my dear friend CA Amit Doshi who had the same dream of creating wealth for investors. With respect to contribution towards the industry, Care Portfolio Managers

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Dedicated Portfolio Manager with 100% variable fees

was among the first to introduce no fixed fee structure where clients only pay if there is performance.

3. How emerging technologies are changing the portfolio and wealth management industry?

Ans. Emerging technologies are changing the way portfolio and wealth management industry does marketing and CRM functions. Within Marketing function, increase in channels of communication to the right audience. For CRM, technology allows seamless client communication, engagement and addressing concerns thereby increasing the bandwidth of CRM personnel in terms of the number of clients that he can manage.

Technology, however, has not changed the way we do Research. The conventional way of due diligence is most reliable.

4. How new economic and taxation policies of Govt. and the global trade scenario are transforming the portfolio and wealth management industry?

Ans. Government policies in recent years including some major steps like Demonetization have been positive for asset management industry. Taxation policies including introduction of the GST has been a boost to the organized sector.

Broadly, formalization of the economy and government measure to curb cash economy resulted in surplus capital in the hands of investors, looking for avenues other Bank Fds. This gave a boost to inflow in equity markets confirmed by the meteoric rise seen in SIPs in Mutual Funds

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CA Arpit Shah Co-founder

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5. Explain the industry challenges in terms of current trends?

Ans. The are three challenges in current trends (that we see for portfolio and wealth management industry) (I) Understanding of Products: Wide variety of Products introduced by Portfolio and Wealth management Industry have created too many options for the endclient who may not be equipped to choose the right product matching to his risk appetite. (ii) Volatility: Volatility is the new normal. Changes in portfolio market value makes investors with curiosity about how future will enfold. This volatility in market value, in case of small caps, is north of 25-30%. This fills the end-client with anxiety which is a challenge as we see end-clients taking unwarranted decisions like pulling out when valuation are most compelling. (iii) Investor behaviour: Return from equities in the previous four years have raised end client expectations. It is rationale to assume that equities will outperform other assets classes in the long-term. But, given the current trend, investors may not be prepared to accept that growth in equities is non-linear.

6. What are the unique factors of your company?

Explain in brief the purpose behind starting and the success story of your company?

Ans. What is unique to our company is the fact that we have created the most client centric ecosystem as a PMS – because this is only line of business that we are engaged in and performance is the only way we can bill our clients – therefore to deliver growth in portfolios is not just our prerogative but also a matter of our survival.

In 2007, I had formed this company after observing that during 2002-2007 we made good money but saw a lot investors had mixed experiences. We realized the difference was our temperament and research skills. We thought that we should provide a platform to other investors by which they can subscribe to our services. The basic sentiment engrained in our thought was that we cared for these investors who believed in long-term equity investing.

Hence we named the company Care Portfolio Mangers Pvt Ltd. However, between 2009-11 we had to surrender our license to SEBI as they raised promoters’ capital requirement from

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Rs50 lakhs to Rs2 crore. During this time we grew our own capital using our investment principles and re-applied to SEBI for a license in June of 2011. Even today, we continue to follow the same investment principles and this has allowed to deliver a CAGR of over 24% to clients. This number is net of our fees and transactions costs.

Comparable number for BSE Midcap and BSE Small Cap were 10.8% and 7.7% respectively.

7. Kindly describe about the products and services of your company.

Ans. We provide both Discretionary and Non-Discretionary portfolio management services. (Non-Discretionary is for clients who have restrictions at their work place and need prior approval from their compliance for example the Big 4 Audit firms). The investment philosophy and portfolio construction, however, remains the same. We essentially run a Multi-cap PMS with a bottom up stock specific approach. Also, we don’t follow model portfolio strategy.

8. What are the future challenges in your industry and how are you preparing the company for that?

Ans. Future challenges is that as market participants become more efficient the universe of under researched companies will compress. As we move nearer to an efficient market stocks start trading nearer to their fair values. This will put a pressure on fund managers in delivering an alpha over market return.

We are currently not affected by this. But once we cross AUM of USD $200 million (over Rs1500 crore) in the coming years we may have to look for relatively bigger companies.

9. Kindly provide a quote which describes your company in the best way.

There are two quotes that I can think: What we really want to do is buy businesses that we would be happy to own forever – Warren Buffet Understand the nature of the companies you own and the specific reasons for holding the stock – (“It is really going up, doesn’t count”) – Peter Lynch

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Alfaccurate Advisors Best Fund Managers Outperforming the Market with Low Risk

S

tock Markets throughout the world sometimes face fluctuation phases and declining stock prices increase the risk of lower returns for investors. Investors need expert advisor firms which can outperform the market and offer the convenience and competitive returns. Most sought after Portfolio Management Service (PMS) providers like Alfaccurate Advisors understand this need and provide higher alpha return than market indices and create wealth for them. The team works hard in a dynamic business ecosystem which has a robust, proactive and process-driven approach to managing a portfolio.

D. K. Aggarwal Chairman & Managing Director

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“

“

Protect Capital, Create Wealth

The Brand Name for Performance Alfaccurate Advisors have remarkably short formed as AAA and as the name suggests it stands worthy of the performance and the hallmark of best quality service. Alpha denotes the active return on an investment. It the performance of an investment against a market index or benchmark. The company aims to deliver strong Alpha.

Accurate –Belief in perfection. Advisory – Exclusive presence only in advisory business.

AlfAccurate Advisors (AAA), established on 23rd Nov 2009, is one of the leading SEBI registered Portfolio Management Service (PMS) firms. The core team has total experience of more than 70 years in Indian capital market.

AAA PMS is multi-cap diversified PMS and has delivered superior risk-adjusted returns during the last nine years. The firm has unwavering faith in strong corporate governance and has established high benchmarks in the industry with respect to transparency, disclosures, and investors’ communication. For instance, AAA is present only in one business segment – Investment Advisory. Also, to avoid any conflict of interest, it does not maintain an in-house brokerage business. The firm has the tie-up with the worldclass institution – Deutsche Bank as Custodians and Fund

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Most

10 Valuable

The

PORTFOLIO Management Service Providers in 2018 Accountant. For NRIs, the bank and custodians are Axis Bank/HDFC Bank.

Leadership Par Excellence Rajesh Kothari is Founder & Managing Director of Alfaccurate Advisors with a rich experience of more than 24 years in Indian capital market. Academically, he has graduated as CWA and also possesses an MBA degree. His investment expertise is proven in both Long Only and Long & Short investment strategies. He was Fund Manager at DSP Blackrock Fund Managers managing various equity mutual fund schemes. During his tenure, the fund has outperformed the benchmark indices significantly. He has been at the back of performance by the equity schemes which maintained its “1st Quartile Ranking” consistently.

Achievements Rajesh Kothari has received CMA Young Achiever Award in 2014. Various financial media houses like by Economic Times have awarded him with “Platinum Fund Manager” for DSP ML Equity Fund and “Gold Fund Manager” award for DSP ML Balanced Fund. He was invited at Maharashtra Economic Summit to present views on Indian Infrastructure. He has shared his expertise as a contribution to the industry through the invitations by the Institute of Directors to present views on Governance Deficit and being elected on the advisory panel of World CSR forum.

Exceptional Strategies Award-winning investment team and proven track record of high returns keep the Alfaccurate Advisors above its competitors. The company’s founders are accessible by investors and have been fund managers themselves who knows every hand on detail about investment strategies.

Some of the unique features of the strategy are staggered investment approach, strong risk management, and clientcentric business model. The company peruses a policy of no conflict of interest with clients. The company has diversified multi-cap portfolio strategy with strong stock selection methodology along with exit Strategy (reduces risk) aimed at wealth creation.

Products and Services The company believes in “Protect Capital, Create Wealth” – meaning managing risk in the portfolio is equally important as generating returns.

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Protection of capital is done by reducing risk through Diversification, Exposure limits, Stagger Investment Approach, and a Defined Exit/Sell strategy. Governance risk, Technology risk, and Business cycle risk are reduced by diversification. AAA PMS diversifies across 17-20 sectors, 40-50 companies and across market cap with 40%+ in large cap.

Wealth creation is done by using 3M investment approach – The companies selected are evaluated and filtered on three parameters - Market Size, Market Share, and Margin of Safety. The companies with strong profitability, strong balance sheet – high ROE, high ROCE and strong free cash flow are selected for creating a healthy portfolio.

Unmatched Products that Beat the Market The performance of the company is unmatched which can be validated through multiple incidents in past. AAA IOP PMS is the main product offered by the company which has delivered 20.4% CAGR returns since its inception against BSE 500 Index CAGR return of 9.2%. It has delivered average returns of 24.6%, 24.9% and 26.6% for 1 year, 3 years and 5 years respectively on a monthly rolling return basis – implies less volatility and consistent performance.

The Future of Investment Space in India Despite India has more than 5500 listed companies, the equity culture in India is still at nascent stage. India needs to build at least 500 companies posting an annual profit of more than Rs. 1000 cr. As the universe of right companies increases, the wealth creation opportunity also expands significantly. The major challenges for PMS industry can be summarized to three basic reasons - the ticket size limit of Rs. 25 lacs and differential taxation for between MF and PMS investor. Taxation is one of the ways to encourage investors to allocate more money into equity as an asset class. Many boutique investment management firms can emerge if government encourages the PMS industry along with Mutual Funds. That in turn can help to channelize financial savings to equity asset class. Brands like AAA form the real assets of financial ecosystem in India. AAA is playing crucial role in enhancing investor confidence and giving them higher alpha with minimum risk.

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Industry watch

Portfolio

Management

Services -

A comparative Analysis with Mutual Funds

22

September 2018|

C

omparing Mutual Funds with Portfolio Management Service is like comparing a public transport with a hired taxi. Everyone would rather prefer a taxi than a public transport for the simple reason of convenience and personalized experience of the journey. As a matter of fact, the Portfolio Management Service (PMS) is a part of wealth management service for high-income individuals. PMS investments are targeting high risk and high return assets and typically have an investment in 20-30 stocks. A portfolio manager is more knowledgeable about assets and market conditions, increasing the chances of good returns on investments. However, a Mutual Fund (MF) is often run by an asset management company and represents an investment scheme for a group of people to pool together their money to invest with common objectives.

Advantages of PMS over Mutual Funds Portfolio management services offer investment services, tailored to meet the financial goals of each investor.

Portfolio analysis is comprehensive in case of mutual funds, the macroeconomic factors as well as emerging markets selections while PMS services rely on blue-chip funds and high growth emerging sectors. In portfolio management investor actually holds stocks in the Demat account though the power of attorney can be given to the fund manager.

Equity mutual funds are bought in units which in turn represent stocks. Portfolio management services charge an initial management fee and also have a profit sharing agreement.

The Difference of Risk Appetite An investor with a risk-taking approach is aggressive on equity funds whereas a risk-averse investor would invest in mutual funds offering balanced and less-risky options. PMS allows aggressive investors to invest larger funds in a single stock. In a mutual fund, the fund manager and his expert team take the decisions on how much and where the investors’ money will be invested. Financial advisors in PMS prepare the variety of asset allocations and risk analysis and offer various types of investment products.

Mutual funds, on the other hand, offer a generalized and spread out investments with low probability to perform better than PMS. Mutual funds follow the same strategy for

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all investors irrespective of their capital positions, and ability to take risks.

The Distinctiveness of Portfolio Management Services PMS can be more aggressive with the potential to generate higher returns in ever-changing market conditions. There are distinct advantages in investing in portfolio management services if the holding amount is large enough to surpass their entry-level investment. It operates with higher exposure to a certain sector or hold on to specific stocks as long as they are delivering growth.

Complete Control for HNIs PMS is a product created to cater to high-net-worth individuals, which is why the threshold for the investment amount is much higher. PMS provides professional managers to develop strategies for consistent returns within the risk constraints. Most of the time, high-net-worth investors give decision authority to portfolio managers, in order to manage the funds for achieving their individual goals. Every trade is communicated to the investor and even a view of his portfolio positions is available on demand.

Investing requires knowledge, time, and the right mindset along with constant monitoring which may not be possible for many. Moreover, the investor can also have his own control over the buying and selling decisions, if he so desires.

Steps to Personalization of Investments u The first step is to identify the objectives behind the investment. u Allocation of the required amount from the funds available to invest. u Listing of assets and securities in aligned with the objectives of the investor. u Preparation of investment strategy based on the analysis of the investor. u Monitoring the portfolio continuously and avoiding the diversion from the investment policies. u Rebalancing it again if the market conditions change sharply. u Discussion with the investor about the analysis of his portfolio and reporting the status.

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The portfolio manager must rebalance the portfolio based on the performance of the portfolio and updated objectives of the investor.

Innovative Products Offered by PMS PMS offers a variety of investment products considering the specific needs of the client. These are listed as below – u u u u u

Concentrated Portfolio – it has only 10-20 stocks of companies with the most promising returns.

Security Basket – these include carefully selected options, indices, commodities, debt or foreign currencies.

A structured product – these are also known as market-linked or index-linked investments.

Principal Guarantee – these products ensures the protection of principal if held to maturity.

Mortgage Backed Securities – these are used to support in down-market conditions.

Benefits of Portfolio Management Services This is a highly beneficial service to investors who are either very busy with their own businesses or who lack the technical expertise in investments. A sensible portfolio manager can optimize or maximize the returns on the portfolio either for shortterm returns or for long-term goals. It helps in reducing the risk of certain asset classes by proper diversification and asset allocation, the risk of volatile markets can be reduced. The most attractive asset classes come with the riskiest position of values but with proper portfolio management, profit can still be maximized. Customization of the investment is the most sought-after feature of PMS. It enables active management of portfolios in which an investor can take his own decisions on the shares or asset classes he wants to invest in.

Promising Future in India Portfolio Management Service providers are very popular in global markets. In India, they are still emerging with few players dominating the market. The increasing number of wealthy individuals, most of whom are young and aggressive for growth, will be the decisive factor for Portfolio Management Services. Technology has not left any sector untouched. PMSs are way ahead of mutual funds in usage of advanced technology. They are becoming more capable of analyzing the financial data and their ability to manage huge funds efficiently for desired goals is also enhanced.

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September 2018|

Dynamic Equities Enhancing Investor Returns through Education and Technology Tools

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lobal economies are becoming interdependent hence stock markets are affected by any major policy change in domestic and international economies. Global investors with substantial funds are looking for relatively stable emerging markets like India.

Portfolio Management Service (PMS) providers with innovative products are helping them in getting higher returns on their investment. Dynamic Equities Pvt. Ltd. is one such company which gives huge emphasis on educating investors on fundamental analysis, sector analysis and quantitative analysis tools.

Shailesh Saraf Managing Director

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Be Your Own Analyst, Trade Simply, Enrich Lives

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Knowledge-Driven Leadership Personified Shailesh Saraf is the Managing Director of Dynamic Equities Pvt. Limited & Dynamic Commodities Pvt. Ltd. He has learned international best practices and continues to strive for the best in terms of both moral and material growth. He has an experience of over 25 years in the financial market, especially in capital & derivatives market operations, trading, research, and management related areas.

He is a popular figure on the investing.com platform, where his free online webinars attract 1000+ registrants per webinar. His channel on Youtube has nearly 14000+ subscribers, where more than 25 of his webinar videos have around 5 lakhs views. Two-day seminars held across cities are educative, practical and have benefitted investors all over India. Shailesh Saraf, along with Shridhar Bhuwalka at the helm of Dynamic group of companies, has been leading the group with intense hard work, dedication, and integrity.

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PORTFOLIO Management Service Providers in 2018 Making a Difference with Dynamics of Equities Dynamic Equities Pvt. Ltd. is a SEBI registered investment advisor and stockbroker, a leading financial services provider, and one of the major players in the equity markets in India, with the membership of NSE, BSE & FPSB India.

The company was incorporated in 1999 with head office in Kolkata. It launched its website www.dynamiclevels.com in August 2011 to provide knowledge and hardcore research information free to investors with more than 2 lakhs users.

The company started its online webinars in January 2017 on www.investing.com website platform and recently launched mutual funds research analysis on its App- Dlevels.

Innovative Technology Tools Dynamic Equities offers free portfolio check followed by a presentation of strategies to PMS clients by in-house research experts. The company has an edge over its contemporaries mainly in the field of data analysis. The Quantitative Fundamental tool is one of its kinds developed by the team for identifying stocks in PMS. The intense effort spanning almost 10 years has resulted in an exclusive quantitative fundamental strategy based research model for PMS Service. All collated together very systematically in a special tool, where at a click of a keyboard, the most relevant data is populated. This quant tool is one of its kinds in the industry and has helped in propelling Company’s PMS performance. It specializes in helping NRIs account opening process and company has a fair share of NRI’s in their list of clients.

Supporting Investor Education The main purpose for launching the dynamiclevels.com website & Dlevels app is Saraf’s belief in the famous quote

by Chinese Philosopher, Confucius – “If you give a man a fish, he will be fed for a day. If you teach a man how to fish, he will be fed for a lifetime.” The intention is to help the investors realize that the stock market is the best place for investment, to guide them to invest their savings in the stock market with the right education.

Dedicated Products and Services The company offers a wide range of products & services.

Few of them can be listed as below Portfolio Management Services: For investors willing to invest INR 25 lakhs or more, Dynamic PMS is the product to go for. To track the PMS performance, the company has launched three Indices – Dynamic Smallcap, Midcap &

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Largecap index, which has been calculated and computed

by NSE Indices Limited, a subsidiary of NSE. Mutual Funds Advisory: Dynamic has also done extensive research on the mutual fund industry and is well equipped to advise & manage big HNI portfolios, specializing in NRI portfolios.

Seminars: Stock Market learning is made simple and powerful through the 2-day seminars which empower investors to be their own analyst.

Free Services: Company also provides free services like Portfolio Check-Up, online webinars, website dynamiclevels.com & App “Dlevels”.

Embracing New Technologies Technology has made it easier for investors to become more knowledgeable and investment in stocks is increasingly preferred. Quantitative Fundamental Analysis is a very robust model for identifying stocks in the portfolio. All the 1600 tradable stocks of NSE are filtered with major fundamental parameters. Remaining 300-400 stocks which are fundamentally good can be further evaluated quantitatively. A combination of Fundamental & Quantitative Analysis can prove to be the most effective strategy for investment analysis.

Preparing for Future Challenges The major challenge facing the industry today is for the Mutual Fund Managers. With the SEBI notification in Oct & Dec 2017, categorization of the stocks into smallcap, midcap and large-cap have led to a lot of restructuring of different mutual funds. This has subsequently affected the Portfolio & wealth management services as well.

By 2018, all listed companies will have to follow a uniform system of accounting known as International Financial Reporting Standards (IFRS). Another major change is that from 2019, the companies which typically give annual consolidated results will have to give consolidated quarterly results. The company has already started employing the Quant Fundamental method and has also prepared its database in compliance with IFRS so that the transition is smooth and without any technical problems for clients.

Dynamic seems to be living its purpose – “Real Research, Trustworthy Research”

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New Generation Companies Creating Wealth through Innovation and Disruptive Strategies

Deven Choksey Promoter

About the Author Mr. Deven Choksey is the Promoter of KRChoksey Group of companies. He has served BSE as the Director of the exchange, post BSE Demutualization and as a Board Member of the BSE Derivative Stock Exchange. He has championed the concept of value investing through strong fundamental research and modern portfolio approach. KRChoksey is among the most trusted, respected and distinguished name in the India’s ď€ nancial markets, for close to four decades.

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September 2018|

Expert’s View

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nvesting in new era clearly belongs to innovations, the scale of operations and consistency in investing in those businesses. Lossmaking business is no more a bad word or social taboo as entrepreneurs and investors don’t mind burning cash when investing in new-gen businesses. India is experiencing a clear shift under disruptive trade emerging out of nowhere and displacing the established businesses.

Let me present to you, some of the interesting stories that will help us understand how technology and some new gen companies have displaced existing players in the last decade. Businesses like consumer finance, Insurance, BFSI, Online Shoppers, and Telecom has created massive wealth for promoters and shareholders.

Let me place both domestic and global examples and references that have led the evolution of technologies with immense success.

Bajaj Finserv – Bajaj Finserv diversified financial services group spanning life insurance, general insurance, and lending, with a pan India presence. A decade old, Bajaj Auto demerged entity has displaced the traditional model of agent serviced Insurance business & banking finance offline model. Their robust digital online model has helped them service larger customer base in just a few years.

With the fast evolution of smartphones, the launch of the first finance app has clearly allowed them

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to hold a strong leadership position in the domestic market. Bajaj Finserv has generated ~39% CAGR return for an investor in last 8 years. Today it is valued at Rs 97,415 cr ($ 14.53bn).

Avenue Supermarts Limited (DMart) – D-Mart’s success has lessons, not only for rivals in the brick-andmortar space but also for ecommerce companies, which are struggling to make profits. The firm has been focused on what it wants, and its expansion has been measured.

In the first nine years of its existence, till 2010, it had just 25 D-Mart stores. Only after perfecting its business model did the company reexpands to around 118 stores. DMart follows the strategy similar to global retailer Walmart and does not conduct discount festivals to raise its sales. In its 15 years of operations, it has never closed, moved or shut down a store. It has been generating profit for the last 5 years.

With a listing price of @ INR 299 on 21st March, the stock trades at INR 1599. Amazon.com Inc., the global giant that’s investing $5 billion in the Indian market, Flipkart Online Services Pvt., the biggest domestic ecommerce company, are yet to make money in India, whereas Avenue Supermarts said it had net profit after tax of Rs 7.8 billion ($117.2million) in the year ended March 2018.

Nonetheless, we have seen global players sighting huge opportunity in coming years with Walmart showing interest to acquire and valued Flipkart at $20bn.

Infibeam – Infibeam is an e-commerce company, focused on developing successful ecommerce platforms and ecosystems.

In addition to Infibeam.com, a multicategory B2C e-retail site, through Infibeam BuildaBazaar (“BaB”) ecommerce marketplace, the company provides a cloud-based, modular, customizable and scalable technology platform as well as ecommerce infrastructure and logistics support for a diverse universe of merchants, products and services. Ecommerce is estimated to be $ 101.9 bn by 2020. That is 6X growth over 5 years is been envisaged for eCommerce driven by factors like new-age technology, convenience, higher adoption rates, and larger reach.

Infibeam listed in April 2016 has generated ~237% return for the investor since then. Today it is valued at $1.49 bn.

R Jio – Jio- Rise of Indian AT&T? - Build multiple sources of revenue – While data remains the primary source of revenue for Jio unlike its rivals, the real money lies in its premium apps.

JioOnDemand and JioBeats have the potential to become Netflix and Spotify of India respectively.

Besides, the company also looks to make a profit by selling 4G enabled LYF smartphones.

Jio is expected to generate Rs 50,000+ cr ($ 7,740 mn) revenue & possible market value would be Rs. 100,000 – 120,000 cr ($ 18,575 mn) in next 1-2 years.

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A global perspective From a global perspective let me pull out a few examples for you that have followed the disruptive strategy. In the late 90s and early 2000, Amazon came up with online bookseller model which forced established bookstores likes, Barnes and Noble, to scale down their operations. Today Amazon is a complete market place selling products across various verticals: from food, grains to fastmoving consumer goods | from electronics to Music & Movies.

Amazon and Alibaba- the Chinese retailer are two of the most successful companies who have emerged by disrupting the conventional retailing.

Apple is another example who disrupted the domination of HP, Dell, IBM by dislodging their PC business within a span of fewer than 5 years when they came up with MAC machines. Apple also dislodged Sony from music and Nokia and Ericson from the mobile phone business Microsoft an erstwhile monopoly player in windows operating systems is now dislodged to no 3 positions by Apple and Google in market cap.

And in the process, Apple grew from $ 8 (Revenue 2000) billion company to $ 229 (Revenue 2017)Bn company commanding a market wealth of $ 936 billion, which has grown @ CAGR of ~24% in last 17 years.

Google came much later after Yahoo.

It started off with search and now they are having about several product verticals including search, OS, maps,

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autonomous cars, Home, (Cloud Platform, Online business, Person Finder, Firebase which provides API that allows developers to store and sync data across multiple clients, Google Fiber, it is internet network infrastructure using fiberoptic communication and Google Cast which lets you cast your favorite entertainment and apps from your phone, tablet or laptop right to your TV or speakers. Their main revenue comes from advertisement amounting to $ 90.3 billion (88% of Total revenue).

Google is now $ 110.8 billion Company with the market worth of $ 806 billion value. Google investors have earned ROI of 25% on CAGR basis over the last 13 years.

Tesla started off with an all-electric car, buying an unused plant from GM and Toyota in Fremont, CA. Starting with sports car which would accelerate from 0 to 60 mph in less than 4.5 seconds, they went to produce a luxury sedan, a 7 seater SUV and now a mass market sedan, likely to be launched in H2 of CY 2017.

They produced the 1st autonomous, all-electric car which is driving on roads in the USA. They went to the height of disruption by opening up all their patents or IPR and made it available to all.

The investment in Tesla is now valued at $ 54 billion and the stock price is quoted at $ 318 as against their IPO done at $ 17 per share, some (7 years of listing) 13-14 years

ago, giving a whopping 52% CAGR return to the investors.

Microsoft the legendary innovator of windows operating systems and office software faced the heat of Android OS from Google and packaged IOS from Apple. An uncrowned King who ruled the world with its OS for more than 2 decades, is now standing down at rank 3 after Google and Apple.

Quick enough in adapting to a new era, MS still commands the valuation of $ 782 billion and is among the 3rd largest company by market value as of now.

Make My Trip has bought a paradigm shift into travel industry over more than a decade now. It was launched in US markets in the year 2000 to service needs of NRIs for their Indo-American trips.

Operations in India began in 2005, starting with flight tickets. A few years later, Make My Trip got listed in NASDAQ. Today it is valued at $3.43 bn today.

In a nutshell, one common trait the mentioned references belong to, they all have emerged out disruptions, and they have displaced established players and have changed their business model as they evolved continuously. It is also very clear that new age entrepreneurs are not averse to think differently and think transformation to chase their dreams.

Indian ecosystem is very well poised, to transform the new generation startups with help of angel investors and build fortunes with or with.

September 2018|

Equitree Capital Advisors Enhancing Investor Returns through Education and Technology Tools

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n the last couple of years, the Indian market has given extraordinary returns. With that, a lot of portfolio and wealth managers have mushroomed in recent times leaving investors confused as to how and whom to rely on for quality advice. In such a scenario, Equitree Capital Advisors represents one of those PMS companies which remain actively engaged with the investors and offer nonchalant advice – keeping only investors interests in mind and not flowing with the market sentiments. The company ensures that investors understand their investment strategy and risks associated with it well enough and set their return expectations accordingly.

Pawan Bharaddia Founder

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“

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Sowing Seeds of Growth

A Companion in the Growth Journey Equitree Capital Advisors Limited started as a proprietary investment office focusing on investing in emerging small and micro-cap companies with a private equity approach. It has recently morphed into a SEBI registered Portfolio Manager and has opened its doors to accept third-party funds from like-minded investors.

The company has been consistently creating alpha returns for its investors by identifying emerging businesses early and staying invested throughout the growth journey. The Equitree team comprises of super specialists & focused investors in small and micro-cap companies; companies typically in the market cap range of Rs. 200 cr - 3000 cr.; a domain largely catered to by High Net-Worth Individuals (HNIs) or occasionally by a few semi-institutional investors. The niche of the company is in identifying these under-invested / under-researched ideas early on and riding on the growth journey with them.

Leaders with “Touch & Feel” of Businesses Pawan Bharaddia & Ssuneet Kabra, are founders of Equitree Capital Advisors Limited and have been longstanding friends for over two decades. Both are Chartered September 2018|

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PORTFOLIO Management Service Providers in 2018 Accountants by education and bring in forty years of collective experience in investing and allied activities.

Pawan commenced his career with global organizations like JP Morgan Chase (then Chase Mahattan Bank) and ABN Amro. He moved on to doing private equity investing way back in 2001, a time when private equity as an investment class was still in a nascent stage in India. Since then he has had an extremely successful stint making investments in small and micro-cap companies across a diversified range of industries.

Ssuneet, on the other hand, has been an in-house advisor to a range of small and micro-cap companies. He has dabbled in an entrepreneurial role himself, managing his family businesses also. He has been an extremely astute and successful investor in real estate. They bring a unique combination of “touch and feel” of how Indian businesses work on the ground. This distinction has been a cornerstone for the success of the company.

Strategic Focus on Small Companies Equitree’s investment domain is flooded with high volatilities as these businesses and promoters remain untested by the larger markets and therefore don’t find participation by the larger institutional investors. However, the experience in understanding of businesses on the ground gives it an edge to reduce these volatilities and identify winners early on. Over the years, the company has been able to pick up the winners early across different sectors like Defense, Building Materials, Agriculture, and Industrial Pipes and so on. These attributes within the company have enabled it to deliver a consistent IRR of over 25%

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over the last six years. Protecting the capital takes first priority than focus on quick returns and it is more biased towards downside risk protection even at the cost of giving up riskier quick returns.

The Distinct Products and Services Equitree follows the classical fundamental, deep value investment strategy. Their maiden investment scheme under the PMS - “Equitree Emerging Opportunities” adheres to this philosophy to the hilt.

This product is completely focused on investing in small and micro-cap companies. Typically companies in the market cap range of Rs. 200-3000 cr are considered in this category. These companies are generally underinvested and under-researched by the markets.

Their proprietary research team looks for a combination of high growth of at least 20-25% during the investment holding period, committed and passionate managements with zeal to scale up business and reasonability of valuations before deciding on any investment opportunity.

Creating value in a reasonably de-risked manner A natural growth almost always follows a slow transformative process but conditions for growth are not constant and there is a constant change.

Whatever happens all of a sudden is most probably unconstructive for growth. Focus on returns is a significant factor, but it is necessary to first protect the capital of investors.

The right growth conditions are created with utmost care and detailed attention.

This careful attention is what Equitree offers to its clients for small and microcap investment.

Ssuneet Kabra Founder

The company gives preference to the downside risk protection and does not mind giving up riskier quick returns.

Risk of negative returns is avoided by keeping a watch for market valuation risks along with management related risks and liquidity risks associated with the stocks in the portfolio.

Active investing through Constant Monitoring Equitree empowers its investments by consistent monitoring of its portfolio.

Careful watch of industry changes, monitoring of the company performance, tracking the developments within the company and also on actions taken by the management are part of the regular monitoring of investment portfolio.

Equitree believes that successful investing is not only in identifying a right investment but is more in knowing when to sell it – a close and constant monitoring is what provides the acumen to constantly review this decision and maximize the returns for investors.

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QED Capital Demonstrating Consistent Performance for PMS Clients

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he investment industry is going through a series of changes. Increasing awareness among investors has raised the bar for the entire Portfolio Management Service (PMS) industry. Improvements in regulations are directed towards transparency especially keeping in mind the interests of the investor community. Investor friendly disclosures, reporting, and other submissions have been made mandatory for asset managers. There are very few players like QED Capital Advisors LLP who are operating on the principle of charging fees only after demonstration of performance.

The Company with a Proven Track Record

Anish Teli Managing Partner & Principal Ofcer

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We have a few simple ideas, ruthlessly executed

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QED Capital Advisors LLP (QED Capital) is a SEBI registered Portfolio Management Services (PMS) firm. It has the objective of being a boutique asset management firm catering to HNI clients by providing them a simple to understand, long-term investment product with a fee structure aligned with interests of the client. QED stands for “Quad Erat Demonstratum” – which translated to what needs to be proven and demonstrated. According to independent research, behavioural factors in decision making are resulting in lower average returns for individual investors compared to overall returns possible from stocks.

The aim is to avoid those biases by following a process driven approach to investment. QED Capitals is one of the few PMS firms in the country who does not charge a fixed management fee. It only charges a performance fee above a hurdle rate. As the name suggests, the company believes in charging a fee only when it has demonstrated and proven performance returns to its clients.

Competent and Committed Leadership Anish Teli is the Managing Partner and Principal Officer of QED Capital. He is a rank holding Chartered Accountant September 2018|

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PORTFOLIO Management Service Providers in 2018 and an MBA from the Indian School of Business, Hyderabad. He has been a successful investor in Indian equity markets for over fifteen years. He has worked in senior positions with private equity firms like ICICI Venture and Morgan Stanley Private Equity Asia. During this time, he continued to evaluate opportunities in the listed equity space also. Beginning in 2011, he started focussing full time on listed Indian equity markets. He also conducted research and developed quantitative trading systems and has been using them successfully since 2012.

The Purpose behind the Inception The purpose behind starting QED Capital was to provide clients with a simple, transparent and aligned investment product. This would help compound their assets over the long term, by tapping into the huge investment opportunities India offers. The company provides services for all, from UHNIs, Family Offices, and mass affluent investors. The investor education campaigns and demonetization have resulted in a shift in attitudes and more savings are flowing into financial assets than physical assets. Studies have shown that there is a ‘Behaviour Gap’ between returns of the market and returns which an investor is able to reap from the market. The company wants to bridge this ‘Behaviour Gap’ by applying process driven decision making combined with disciplined execution.

Client Service with Unique Products The company offers its flagship product ‘Alpha-Bets’ to PMS clients. The objective is to generate the long-term capital growth from an actively managed portfolio of equities. Alpha-Bets’ works with investment method of combining fundamental parameters with long-term measures of momentum in a sophisticated manner. AlphaBets is a suitable product for investors who are ready with an investible surplus for the stock market for the period of at least five years or more. Robust risk management ensures the preservation of capital during adverse market conditions. The portfolio only includes stocks which confirm to companies’ stock selection filters and criteria’s which help in delivering superior returns compared to the benchmark. Since inception it has delivered returns (post fees and expenses) of 16.84% p.a. vs benchmark returns of 11.7%. On the downside, the portfolio has seen a maximum drawdown of 6.5% vs 9.94% of the benchmark. Hence, QED Capitals has managed to do better on absolute as well as risk adjusted parameters. The returns stated above have

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been calculated by the custodian HDFC Bank and certified by its auditors.

Simple Process for Reliable Results In decision making, the company uses a mix of qualitative and quantitative analysis in the stock selection process.

Investment process at QED Capital has three simple steps.

1. Investment Universe - Select 500 companies - market capitalization > 500 Cr. 2. Quantative Filters - Reduce them to list of 80-100 - filters Growth, EPS, RoE, overall strength.

3. Qualitative Filters - Reduce them further to 15-20 stocks - Growing sectors, sector leaders, re-rating catalysts and well-managed companies.

Preparing for Challenges Some of the challenges in the industry are lack of a standard way of evaluating the performance of a portfolio manager. Many fund managers were deviating outside their stated mandate called as ‘style drift’, in order to achieve performance in the short term. Asset manager’s reputation depends on the timely reporting of data, transparency in fees, and portfolio performance. Technology is being used to better manage routine transactions and managers are able to focus more on value addition and customization to their clients and investors.

Future Full of Opportunities There seems a bifurcation happening in the asset management industry. Companies are either very large and standardized players or small/boutiques customized with better alignment of client interests. The portfolio and wealth management industry is still in its infancy in India. Indians are getting richer by the day and PMS industry has yet to reach them. There are about one lakh fifty thousand families in India with the wealth of over 25 Cr rupees or more.

These families are expected to rise to around five lakh by the year 2025. So, the companies will have to gear up in terms of manpower to address this opportunity. PMS providers like QED Capital Advisors LLP are coming up with innovative solutions to address the need.

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INVESTMENT PORTFOLIOS

An Undisputed Way to Create Wealth “Capital as such is not evil; it is its wrong use that is evil. Capital in some form or other will always be needed.”

– Mahatma Gandhi

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nvesting is the action of promising money or capital towards an effort, with the expectation of obtaining a return, additional income or profit. Investment is significant to achieve financial goals and provides a buffer for unforeseen expenses that may arise in future. As it takes years or even decades for a seed to express itself into a tree, wealth creation is also a slow process with its own gestation period. Individuals aspiring to develop an investment portfolio for wealth need to give their portfolio sufficient time to grow into a wealth creator.

Investment Approach with Portfolios There are various ways to invest but investing in the stock market is a great way to generate wealth over a period of time. Investing essentially refers to a long-term assurance of money as opposed to short term trading or speculating.

Constructing a well-maintained portfolio is vital to any investor's success in creating wealth. Short-term investment also comes with associated higher risk. Intelligent investing is the key to build wealth as risks are integral to it. The business in which the amount is invested may go down in value or even close down completely. It is important to research about the businesses and analyze the risk before putting in the money.

Structure of a Model Portfolio As an individual investor, the model portfolio should meet the future needs for capital. They need to learn how to

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strike the right balance in asset allocation is best for personal investment goals and strategies. This is regardless of whether there are a dozen companies or a hundred in the equity portfolio they own.

The general principle for an investment is that around half of the portfolio should go for blue-chip or other well established companies. The other half should go in upcoming mid-caps stocks and the balance in small lesser known companies with high potential for growth. The stocks selected should represent a stable financial position and a well-managed balance sheet. The real challenge of building up a portfolio is to maximize earnings over the holding period. Five to ten good stocks should be held actively at any given point of time. For long term investment in stocks, considerations may be the market capitalization, CAGR, risk versus return and P/E ratio.

Risk-Return Trade Off Risk and return are inherent components of any investment.

These two factors remain always relevant irrespective of the investment in equity in the stock market, government bonds, financial instruments, and real estate. While the risk refers to the likelihood of incurring losses comparative to the investment, the return indicates the actual gain or loss generated from investment. There is no investment which is completely risk free. The risk to return tradeoff is therefore an investment principle that drives the profitability.

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Expert Views

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Asset Classes - Building Blocks of a Portfolio There are numerous asset classes in the investment market that relates to different levels of risk and return. The general rule is that higher the return higher will be the risk. Public and corporate bonds, fixed-income securities, cash, marketable securities, equities, stocks and commodities are the most liquid asset classes. Investment in hedge funds, venture capital, crowd-sourcing or newly emerging crypto-currencies is also considered under the asset classes by some of the analysts.

There is a bucket approach which offers a modest method for distributing assets and provides psychological benefits as well. There is one occurrence that is frequently observed in the stock market that the returns from stocks vary greatly over short periods of holding. But in the long run stocks consistently beat the rate of inflation and the return from other investments.

Steps to Build the Wealth Wealth creation is a long term process with a strategy driven by a well-crafted plan to generate returns. A little help from the professional portfolio management service providers is recommended especially if the amount is higher.

A Blueprint of Wish List - The first step in any major project is to create a wish list and it is equally important to be specific with the financial wish list. Most people have multiple items on their wish list - such as buying a house or a car, payment of kids' college expenses, and generating income for retirement.

Prepare a Budget - The real work is in the details of the project. Investors should calculate an estimated amount required for the project. They should also determine the monthly amount that is required to be kept aside for allocation as an investment towards a short-term goal.

Diversify - Once the budget is ready the next step is the actual plan of the portfolio. Experts do not believe in a perfect allocation but various types of assets have their own qualities that are appropriate for specific goals.

Wealth Creation Process Wealth creation has its own way of unfolding which takes variable time as the investments made previously starts accumulating returns. Even if someone suddenly gains enormous returns, there might have an equal and opposite adverse situation either at one or multiple places to compensate for the sudden rise. Therefore, the wise portfolio advisers always caution investors planning for wealth to wait and watch in a disturbed stock market.

With sufficient time, the power of compounding sustains the wealth and also multiplies it many times over. The wealth creation, portfolio advisors say, is not a process of unbroken growth over the time period and is often back-loaded in the given long-term period. The concentrated growth occurs towards the latter half of the investment period if the investors have the patience to hold on to their goals even in short-term chaos of the market. Investing money is necessary for allowing it to grow.

Minding the Life Goals As investment grows the goal should not be profit maximization but to achieve the life goals that are decided. Major life events in investor’s life should be connected to portfolio review and possible revisions. Life events such as a job change, the birth of a child should result in revised allocation of assets. Even if there is no life-changing event, the review of the portfolio should be carried out at least once a year. The returns generated from investment are further reinvested which consequently show the compounding effect. Earning money on the money already earned is an undisputable way of creating wealth over time.

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September 2018|

Sixth Sense Ventures A Smart Value Creator Fund for Indian Opportunities in Consumer Brands

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ndian growth story is emerging with strong market and resilient economy under the strong rule of law.

According to McKinsey&Company, investing with the socially responsible impact assessment is a proper policy to catalyze, and scale up the methods that improve millions of lives. Indian consumers with large social needs and companies serving them are surfacing as new wealth creators. The greatest value is generated by identifying the trend and investing in promising brands at a very early stage. Sixth Sense Ventures is proud of its ability to spot such trends and take calculated risks to create maximum value for both the investors and investee companies. It offers more than just capital to the investee companies through its unique ecosystem.

Nikhil Vora Founder & Chief Executive Ofcer

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Investing in the CONSUMER of TOMORROW….

TODAY!

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A Fund for Consumer Innovations Sixth Sense Ventures is a venture capital firm specializing in growth capital investments. Founded in 2014 and operating from Mumbai, it is India’s first domestic, consumer-centric venture fund. The name ‘Sixth Sense’ indicates the intuition of picking the value trends early. It invests in consumer innovations at an extremely early stage.

Investment for them is not a mere passive capital commitment but an active endeavor for the business. Within the core team, it has a cumulative experience of over seventy years in the wider consumer domain which can foresee trends together with deep insights. Its ‘Centre of Excellence’ comprises of the best in class industry leaders as mentors who are passionate about engaging with entrepreneurs. Sixth Sense provides valuable strategic inputs to the investee companies through its strong ecosystem offerings like brand capital and backend capabilities at critical junctures of their growth story.

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PORTFOLIO Management Service Providers in 2018 Sensible Thought Leadership Nikhil Vora is the Founder and Chief Executive Officer of Sixth Sense Ventures.

Nikhil is regarded as one of the strongest analytical minds in the country with 25 years’ experience in Consumer Domain. These are some of the features in his cap t Ex - Managing Director and Head of Research at IDFC Securities t Voted as India’s No.1 analyst in the Asia Money polls Asia’s Best Analyst by the Wall Street Journal t Thought Leadership Award from IDFC Ltd t Member participant at the Future Leaders Program at the Saïd Business School, University of Oxford, London. t Invited by the ‘Nestle Global Consumer Board’ and ‘Hindustan Unilever’ to evolve a critical and strategic roadmap. t Amongst the First Investors (Personal capacity) in PayTm (One97); Vini Cosmetics (Fogg), Parag Milk (Go); Kangaroo Kids / Billabong High; BVG Ltd; Purplle.com; Bewakoof; Infinite Analytics; Saucery Brands etc.

In-Depth Intuitive Strategies Sixth Sense Ventures are known for its several strategies developed by core team with their in-depth analysis and insights from market trends. These strategies start with product specifications which include identifying businesses which have created a unique presence in the large space. In turn, these spaces are selected based their large potential such as sectors dominant with a duopoly. Value Creator strategy seeks to invest early and thereby create the largest value for clients. Risk Appetite is crucial to investment strategy at Sixth Sense and ability to take calculated risks is its core strength.

Unique Products and Services Focused on India Sixth Sense has developed a unique ecosystem of products and services that are built with the inherent strengths of the company. It has launched two schemes to cater to the needs of different investors.

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Sixth Sense India Opportunities I (SSIO I) – It is the first scheme launched in Nov 2014 with a corpus of 118 Cr rupees invested across ten companies. This scheme is representing India’s first consumer-centric domestic venture fund and has already invested in exciting successful ventures. Eight of them have already seen significant up-mark with follow-on investments. SSIO I investments show a very high rate of return at 2.3x MoC with two of listed ones measuring up by seven to nine times within the period of one and half years. The scheme has already started returning capital to investors in its third year.

Sixth Sense India Opportunities II (SSIO II) – It is the second scheme launched in Nov 2017, with a corpus of 250 Cr rupees (+100 Cr green shoe option). This fund has invested in six interesting companies and portfolio is diversified across sectors like Edutech, Healthcare, Supply Chain, and Personal care & Hospitality. The continued trust of investors in the schemes is realized by the fact that eighty percent of SSIO - I investors have committed to invest in SSIO - II as well. SSIO II is currently active and expects to announce close in next 2-3 months.

This scheme is investing in companies for its portfolio with four major factors. The companies operating in large spaces or scope of business with huge potential for growth in the market; the companies owned or managed by firstgeneration young entrepreneurs are also preferred; Identifying companies offering ‘niche’ products for consumers within the large universe, and companies whose promoters have the ability to take calculated risks are central methodologies.

Forecasting Future Trends The company develops its strategies based on the next big wave of productive functional growth. Entrepreneurs with entirely diverse skill sets and capabilities, not necessarily the capital, will be the front-runners in growth. The core team is engaged with a vision to create a future organization that gets recognized as a medium for investments for all types including angel, venture, private, and listed in consumer-centric businesses in India. Ultimately, the performance of Sixth Sense Ventures depends on the financial returns it delivers to the investors and whether it gets back repeat business from the promoters supported by the company.

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SMC Investments and Advisors Enabling Wealth Preservation and Enhancement with Optimized Returns

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merging economic policies of the government like demonetization and GST have created the favorable situation for investors resulting in record inflows into financial products. Investment companies like SMC Investments and Advisors are reaping the fruits of this opportunity by providing an optimal combination of value, growth, and quality investment options to HNI investors.

The Diversified Group

D. K. Aggarwal Chairman & Managing Director

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Building Wealth, Enriching Lives

SMC Investments and Advisors is a part of the prestigious SMC Group. Established in 1994, SMC is a well-diversified financial services company based in India and abroad, offering one-stop investment solutions in trading & investments. The group has a highly efficient workforce of around three thousand employees and over twenty thousand registered associates/service providers for distribution segment. It offers advanced brokerage services with cutting edge technology. Services are available across almost all categories of asset classes like equity, derivative, currency, and commodity. It also serves in domains like financial analytics, mortgage advisory, investment banking, real estate advisory, distribution of financial products and financing.

Advisors with Strong Research Backup SMC Investments & Advisors is a SEBI Registered Portfolio Manager. SMC Portfolio Management Services (PMS) have been designed to cater to the individual investment objectives of different investor classes. There are very few wealth management companies in India who are following research oriented and methodical approach in India. Companies like SMC Investments and Advisors is one of them equipped with a large dedicated team of the best talents in the country for research-based investments.

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PORTFOLIO Management Service Providers in 2018 Strong commitment to research empowers the analysts to focus on robust valuation techniques.

Equity & Real Estate Solutions, Wealth Builder Process, Financial & Investment Planning, and Alternative Investments.

Entrepreneurial Leadership D. K. Aggarwal is Chairman & Managing Director of the SMC group of companies a Fellow Member of The Institute of Chartered Accountants of India (ICAI) with over two decades of experience in the securities market & financial services.

He has got the prestigious “Entrepreneur Excellence Award 2016” from PHD Chamber of Commerce. He is the Vice President of “PHD Chamber of Commerce”, around the 113-year-old business chamber. Apart from this, he held the following positions: • Vice President, PHD Chamber of Commerce and Industry.

• Former National President of CPAI. • Member, BSE, MSEI, NCDEX & MCX Board Advisory.

• Former Chairman, Capital Market Committee & Chairman of Banking Committee & Commodities Exchange Task Force of PHDCCI. • Former Chairman, Legal & Technical Guidance Committee of (ANMI-NR).

• Former Co-Chairman, All India Business Development Committee of ANMI. Wide Range of Products and Services Being an unbiased advisory to the clients based on the strong research is the unique proposition of the company.

SMC always endeavor to enhance and preserve investors’ wealth for the long-term. The company’s product kitty is unique, which differentiate it from competitors. Some of the innovative product and services offered to the clients are given below.

Investment services – These are Broking/Institutional Desk which includes Trading and Clearing member on NSE and BSE in Cash and F&O segment, Commodity Broking on MCX and DGCX & Currency Trading. Portfolio Management Services: (In-House & Third Party) It includes Equity PMS and Quant Based Portfolios. Wealth Management Services include structured products, Private

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The Financial Services – These are mainly Distribution of IPOs & Mutual Funds, Fund Mobilization through the distribution of Debt Instruments & Corporate Fixed Deposits. The company is facilitating all categories of Alternative Investment Funds (AIFs) to the clients.

Insurance Broking is done for both Life & non-life Insurance Products. Financing & Loan Syndication Providing Loans against Securities & Properties, Business Loans to SMEs. It is also facilitating debts by tie-ups with approximately forty banks and NBFCs. Investment Banking Corporate Advisory, Debt Syndication, FCCB, IPO, FPO, and Rights Issue, Providing Investment Banking Services for Private Equity, M&A, Debt Advisory.

Advisory Services – These includes Real Estate Advisory which provides Real Estate Solutions to Investors, Corporate and Developers across the Country. NRI & FPI Services providing Trading facilities in Equity & Derivatives and Investments in IPOs & Mutual Funds to NRIs & FPIs. Depository Services are provided for both Equities and Commodities. It also facilitates opportunities for investors to participate in the Unlisted Equity space. It offers different kinds of Structured Products like Equity linked capital protected or unprotected. The Parent company is one of the POPs for National Pension Scheme and has tied up with different players for Trust & Will Services.

The Future Challenge of Technology Adaptation Technology plays a major role in term of execution of clients’ investments and reporting the portfolio of the client.

Robo advisors are becoming popular as they are automated to execute a financial investment plan and also make instant health checkup of portfolio investment suggestions, manage money, and save taxes. The company is mitigating these by arranging updated software and latest client reporting tools available in the industry. Retention of talented finance experts is another major challenge in the portfolio management industry is facing today. SMC follows best HR practices for its employees to build a strong team for the upcoming future.

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