PMS & AIF Special Edition

JAN 2020

MAVENS OF MANAGEMENT

PMS & AIF

COVER STORY

Pg. 18

Toppers of Tumultuous Times - Pg. 12

Asset Allocation What and What NOT

by - Shankar Sharma - Pg. 100

A Lucid Guide of Latest SEBI - PMS Regulations Pg. 111

Index 1

Alpha Creators of the Decade PMS vs MF

Forgotten Reminder

10

Book shelf Classique

“Beating the Street” - by Peter Lynch

Toppers of Tumultuous Times Star Award-PMS

18

4 12

Mavens of Management (50 to 500 Crore AUM)

CAT-I - AIF New Age Investing

81

84

CAT-II AIF Potential of Indian Real Estate

CAT-III AIF Long-Short Funds

100

Asset Allocation What & what NOT

Doubtful Narrative of Small cap

106

86 102

Which is More Valuable

SEBI - PMS Regulations Comprehensive Guide

111 123 Contagion psychology

Vishuddha Capital

107

FROM

EDITORIAL DESK “If I may be allowed to appropriate the term speculation for the activity of forecasting the psychology of the market, and the term enterprise for the activity of forecasting the prospective yield of assets over their whole life, it is by no means always the case that speculation predominates over enterprise”.

“It is usually agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges” - John Maynard Keynes in “The General Theory of Employment, Interest and Money” (1936).

Keynes’ quote above would be seen by the Stock Markets today as archaic, outof-date, and even hackneyed or incomprehensible to Novice Investors. For, today, the stock exchanges have turned, quite

reasonably too, inexpensive, thanks to the ever-evolving technologies. These changes have practically brought the terminal into your pockets, in consonance with conveying digestible information bytes to your table. Furthermore, across the globe, the ability to identify and predict the prospective yield of the assets has also increased multi-fold, by conceiving and deploying successfully, various quantitative and technologybased solutions.

Specialized and focussed institutions and intermediaries started spending considerable amount of money and time in developing this profession.

Trends in the Indian Stock Market data also confirm this, indisputably.

An interesting case in point would be the Portfolio Management Services (PMS) industry. The AUM of Portfolio Managers has seen

a very impressive growth during the past seven years from Rs 4,72,520 crores (82,391 clients) during February 2012 to Rs 18,07,938 crores (1,51,618 clients) in April 2019. A very encouraging trend is that the number of clients investing in PMS has nearly doubled during this period. Certainly, this shows the growing interest of investors in the Equity Markets, and the proof of confidence and comfort they have in this industry.

This issue of PMS & AIF carries the analysis of data based on 1 year, 3 years, 5 years and 10 years performance. It is heartening to note that all the Fund Managers (sample taken into account by PMS Bazaar detailed analysis is inside this issue) of PMS outperformed their respective Benchmarks during the past decade. In the 10-year duration category, the 100% outperformance by the PMS industry is ample empirical evidence to substantiate the claim that the PMS is the best wealth creation tool. It is a truism to state that good performance comes only from correct non-consensus forecasts. On the one side, it is challenging and demanding to

make non-consensus forecasts correctly. On the other, it is even harder to act on those nonconsensus forecasts steadfastly.

PMS Bazaar congratulates the Portfolio Managers for their ability and courage to do this.

Graham & Dodd rightly pointed out: “Investment is the discipline of relative selection�. As this issue goes on to prove, time and again, only the disciplined and rigorous process of investing will bring in good performance.

Portfolio Management Service providers are testimony to this aphorism. In this issue, vital details of number of PMS & AIF entities have been compiled for the convenience and utility of our esteemed readers. Hope you will find them helpful!

We once again thank you for your continued patronage and support.

We wish you all a Very Prosperous and Flourishing New year 2020!

Editorial Team

ONE

DESTINATION FOR

PMS & AIF

360

0

Comprehensive Portfolio Analysis

Unique & time tested methodologies used for analytical-evaluation of all aspects of data.

Best Financial Services Award 2018

12000+ Registered Investors

125+ PMS Strategies

www.pmsbazaar.com

10+ Countries Support

A DECADE-LONG DEXTEROUS ALPHA CREATION OF PORTFOLIO MANAGERS

Percentage

Active Portfolio Management is like maneuvering a sailboat. Mr. Jimmy Dean once quipped, “I can’t change the direction of wind, but I can adjust my sails to reach my destination”. How befitting the adage to the intricate arena of Portfolio Management. There could be Macroeconomic, Geo-political or Sectorial head-winds, crosswinds or tailwinds.

A competent and experienced Portfolio Manager can tactically steer through winds, waves or whatever may be the obstacle, with the single-minded aim to deliver consistent returns in the long run. Regulations mandate that Mutual Funds should not to hold more than 10% of the entire corpus of the Fund in a single Stock, but the Portfolio Management Services have no such limitations. The uniqueness of the PMS industry has been that better Alpha can be created through their concentrated nature of the Portfolio building. PMS Bazaar Research Team has analysed both PMS Strategies and the Mutual Fund schemes. This is presented in this report.

As experience matters and investments are long-term oriented, we have analysed only the Portfolios which have completed 10 years as on 31-Dec2019. There are 17 strategies that have completed 10 years or more, within the

PMS Bazaar universe. As per the AMFI data, Mutual Funds Schemes with more than ten years’ experience stand at 192. Out of these, two Funds are excluded from this study**. Hence, we have studied 190 Mutual Fund Schemes.

We have analysed the data based on the performance for 3 years, 5 years and 10 years, with respect to their respective Benchmarks.

Rather than looking at the returns and the usual methodology of listing based on ranking, we have analysed the number of Portfolios/Funds based on Out-performing, Under-performing or in-line with the respective Benchmarks.

Exhibit-1 Performance comparison 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

PMS-1 yr

MF-1 yr

PMS-3 yr

MF-3 yr

PMS-5 yr

MF-5 yr

PMS-10 yr

MF-10 yr

Outperformed

52.9%

41.1%

29.4%

23.7%

58.8%

29.5%

100.0%

51.6%

Underperformed

41.2%

44.7%

17.7%

57.9%

0.0%

44.2%

0.0%

22.6%

Neutral (± 1%)

5.9%

14.2%

52.9%

18.4%

41.2%

26.3%

0.0%

25.8%

As on 31-Dec-2019 - Mutual Funds Data Source = AMFI

** (1) SBI Magnum Equity ESG Fund - Bench-mark data of NIFTY 100 ESG Total Return Index is available only from 01-Apr-2011 (launch date of index) - hence 10 year return cannot be compared. (2) DSP Natural Resources and New Energy - has a composite Bench-mark of MSCI World Energy 10/40 Net Total Return(35.00), S&P BSE Oil & Gas TRI(35.00), S&P BSE Metal TRI(30.00).

PMS & AIF SPECIAL EDITION JAN 2020 | 1

Though one year is not the right timeframe to assess any long-term investment, we have included one year too in this analysis. The percentile categories are posted as Exhibit-1 and Exhibit-1A

Exhibit-1A Performance Comparative Analysis : Portfolios/Funds completed 10 years Period

Investment tool/category

Outperformed the Benchmark

Total Numbers

Portfolio Management Services

17

1 Year Mutual Funds

190

Portfolio Management Services

17

3 Years Mutual Funds

190

Portfolio Management Services

17

5 Years Mutual Funds

190

Portfolio Management Services

17

10 Years Mutual Funds

190

Underperformed the Benchmark

In-line with Benchmark (± 1%)

9

7

1

52.94%

41.18%

5.88%

78

85

27

41.05%

44.74%

14.21%

5

3

9

29.41%

17.65%

52.94%

45

110

35

23.68%

57.89%

18.42%

10

0

7

58.82%

0%

41.18%

56

84

50

29.47%

44.21%

26.32%

17

0

0

100%

0%

0%

98

43

49

51.58%

22.63%

25.79%

As on 31-Dec-2019 - Mutual Funds Data Source = AMFI

10 Year performance comparison

Exhibit-2

The Alpha creation details of 10 year performance are tabulated in Exhibit-2.

The important observation is that, for a 10 year holding period, 100% of the PMS strategies have outperformed their Benchmark during the last decade, while only 51.58% of the Mutual Funds have outperformed their respective Benchmarks.

We appreciate the Managers for their outperformance.

100% 80% 60% 40% 20% 0%

MF

PMS

Outperformed 100%

Underperformed 0%

Neutral (± 1%) 0%

MF

51.58%

22.63%

25.79%

PMS

40.00% 20.00%

MF Outperformed 58.82%

Underperformed 0%

Neutral (± 1%) 41.18%

MF

29.47%

44.21%

26.32%

PMS

MF

As on 31-Dec-2019 - Mutual Funds Data Source = AMFI

2 | PMS & AIF SPECIAL EDITION JAN 2020

PMS

Exhibit-3

60.00%

PMS

MF

As on 31-Dec-2019 - Mutual Funds Data Source = AMFI

5 Year performance comparison

0.00%

PMS

The Alpha creation details of 5-year performance are shown in Exhibit-3.

None of the PMS Strategies has underperformed their Benchmark on a 5-years basis, while 44.21% of the Mutual Funds have underperformed their respective Benchmarks.

3 Year performance comparison

Exhibit-4

The Alpha creation details of 3-year performance are tabulated and presented in Exhibit-4. On 3-year return basis, 57.89% of the Mutual Funds have underperformed their respective Benchmarks, while only 17.65% of the PMS Strategies have underperformed.

Even on 1-year basis, PMS Strategies have performed better than the Mutual Funds.

60.00% 40.00% 20.00% 0.00%

MF

PMS

Outperformed 29.41%

Underperformed 17.65%

Neutral (Âą 1%) 52.94%

MF

23.68%

57.89%

18.42%

PMS

40.00% 20.00%

MF

PMS

Underperformed 41.18%

Neutral (Âą 1%) 5.88%

MF

41.05%

44.74%

14.21%

PMS

MF

PMS

Exhibit-5

60.00%

Outperformed 52.94%

MF

As on 31-Dec-2019 - Mutual Funds Data Source = AMFI

1 Year performance comparison

0.00%

PMS

The Alpha creation details of 1-year performance can be found in Exhibit-5. Though one year is not the right period to assess any long term investment tool, we have included the one year analysis to know the performance during a year of volatile Equity Market. PMS Strategies have performed better on this 1-year analysis too.

As on 31-Dec-2019 - Mutual Funds Data Source = AMFI

We appreciate the Fund Managers of Mutual funds (51.58% of the total), who have outperformed their respective Benchmarks during the past decade.

Majority of the Benchmark indices have performed between 8% and 9% CAGR, during the past decade. As per this report, the 100% outperformance by the PMS industry is a solid empirical evidence to substantiate the claim that the PMS is the best wealth creation tool!

PMS & AIF SPECIAL EDITION JAN 2020 | 3

1-Jan-04 9-Mar-04 13-May-04 16-Jul-04 17-Sep-04 23-Nov-04 28-Jan-05 4-Apr-05 6-Jun-05 9-Aug-05 14-Oct-05 20-Dec-05 24-Feb-06 4-May-06 5-Jul-06 7-Sep-06 13-Nov-06 17-Jan-07 26-Mar-07 1-Jun-07 3-Aug-07 9-Oct-07 11-Dec-07 15-Feb-08 29-Apr-08 3-Jul-08 9-Sep-08 17-Nov-08 23-Jan-09 2-Apr-09 12-Jun-09 14-Aug-09 22-Oct-09 29-Dec-09 5-Mar-10 12-May-10 14-Jul-10 16-Sep-10 19-Nov-10 24-Jan-11 30-Mar-11 6-Jun-11 8-Aug-11 14-Oct-11 22-Dec-11 24-Feb-12 30-Apr-12 3-Jul-12 6-Sep-12 12-Nov-12 17-Jan-13 21-Mar-13 29-May-13 31-Jul-13 8-Oct-13 12-Dec-13 14-Feb-14 25-Apr-14 30-Jun-14 4-Sep-14 17-Nov-14 20-Jan-15 26-Mar-15 3-Jun-15 5-Aug-15 12-Oct-15 17-Dec-15 22-Feb-16 3-May-16 5-Jul-16 9-Sep-16 17-Nov-16 19-Jan-17 28-Mar-17 2-Jun-17 7-Aug-17 12-Oct-17 15-Dec-17 21-Feb-18 30-Apr-18 3-Jul-18 6-Sep-18 15-Nov-18 21-Jan-19 27-Mar-19 4-Jun-19 7-Aug-19 17-Oct-19 23-Dec-19

The Forgotten Reminder

“

Source: NSE, ACE Equity.

4 | PMS & AIF SPECIAL EDITION JAN 2020

Reversion to mean is the iron rule of the financial markets

P/E

Average P/E

Mr. E. A Sundaram Executive Director o3 Capital

We shall begin with a quote from the great John C Bogle, one of the investment world’s titans. He is credited with this classic quote:

Every too often, many of us tend to forget this simple but extremely powerful rule, only to rue it later.

”

As an example, let us remember the mid-cap stock boom of just over two years ago. In 2017, there was such a frenzy about mid-cap and small cap stocks. The extent of the frenzy can be gauged from the valuation chart of the Nifty Midcap index (2004-2019):

120

Nifty Midcap 50 Index - PE history (2004-2019)

100

80

60

40

20

0

When the long-term average PE multiple of the midcap index has been 24 times, what would drive anyone to buy midcap stocks when it is nearly 110? This can only be for two reasons: 1. The short term performance of the midcap index in 2017 was so fantastic that it lured many people, and 2. The rule of reversion to mean was forgotten.

The present valuation of the mid-cap index is now about one fifth of what it was in the heady days of 2017. It has reverted to its mean.

The mid-cap index has, as a category, given similar returns compared to the large cap-index or small-cap index, although in temporary periods, one seems better than the other (another instance of the rule of reversion to mean) Comparative movement of large-cap, mid-cap and small-cap indices BSE indices compunded Growth Rate in various cycles Period of Study

BSE Sensex

BSE Mid Cap

BSE Small Cap

June 2003 - June 2008

30.10%

33.30%

38.70%

June 2008 - June 2013

7.60%

2.10%

-3.40%

June 2013 - June 2018

12.80%

21.00%

23.20%

June 2018 - Dec 2019

10.70%

-2.10%

-10.00%

June 2003 - Dec 2019

15.90%

16.10%

15.30%

Source: BSE

The same rule is applicable to individual stocks as well. Let us have a look at some of the most popular names in India’s stock market.

Hindustan Unilever Ltd (HUL) Hindustan Unilever - Valuation history (1996-2020) 70.00

60.00

50.00

40.00

30.00

20.00

10.00

1-Jan-96 2-Apr-96 1-Jul-96 30-Sep-96 3-Jan-97 1-Apr-97 1-Jul-97 26-Sep-97 26-Dec-97 26-Mar-98 26-Jun-98 21-Sep-98 21-Dec-98 19-Mar-99 18-Jun-99 10-Sep-99 9-Dec-99 6-Mar-00 5-Jun-00 29-Aug-00 23-Nov-00 19-Feb-01 18-May-01 10-Aug-01 8-Nov-01 6-Feb-02 6-May-02 29-Jul-02 25-Oct-02 22-Jan-03 22-Apr-03 16-Jul-03 10-Oct-03 2-Jan-04 31-Mar-04 25-Jun-04 17-Sep-04 15-Dec-04 11-Mar-05 6-Jun-05 31-Aug-05 29-Nov-05 24-Feb-06 25-May-06 17-Aug-06 13-Nov-06 9-Feb-07 11-May-07 3-Aug-07 30-Oct-07 24-Jan-08 24-Apr-08 21-Jul-08 17-Oct-08 19-Jan-09 23-Apr-09 20-Jul-09 16-Oct-09 14-Jan-10 15-Apr-10 8-Jul-10 1-Oct-10 28-Dec-10 24-Mar-11 21-Jun-11 16-Sep-11 16-Dec-11 12-Mar-12 6-Jun-12 31-Aug-12 29-Nov-12 22-Feb-13 23-May-13 19-Aug-13 14-Nov-13 10-Feb-14 13-May-14 6-Aug-14 11-Nov-14 5-Feb-15 7-May-15 30-Jul-15 28-Oct-15 25-Jan-16 27-Apr-16 21-Jul-16 20-Oct-16 13-Jan-17 13-Apr-17 11-Jul-17 6-Oct-17 2-Jan-18 3-Apr-18 27-Jun-18 25-Sep-18 24-Dec-18 20-Mar-19 20-Jun-19 18-Sep-19 17-Dec-19

-

P/E

Average P/E

Source: ACE Equity

The chart above is the history of PE multiples for Hindustan Unilever (on rolling 1-year forward earnings) from 1996 to 2019. The PE multiple of Hindustan Unilever, which was more than 50 times in early 1999, fell to 20 times just four years later. It again went above its long term average of 32 times PE multiple sometime in 2013, and is now quoting at a multiple of over 50 times once again.

The argument one hears nowadays is that “quality” stocks deserve to be trading at valuations like this. Well, HUL’s quality was not inferior in the period between 2003-2010, when its stock price was subdued. Let’s have a look at the financial performance of the company during this period.

PMS & AIF SPECIAL EDITION JAN 2020 | 5

Hindustan Unilever Financial Performance DESCRIPTION

Total Income

(INR - Millions)

Dec-04

Dec-05

Dec-06

Dec-07

Mar-09

Mar-10

(12 m)

(12 m)

(12 m)

(12 m)

(15 m)

(12 m)

109495.98

118839.41

128205.85

142942.52

210842.50

181594.10

PBIDT

17937.44

17497.43

20049.87

23191.75

32610.30

29198.80

PBIT

16588.71

16113.68

18693.21

21772.69

30610.60

27279.40

PAT

12013.14

13228.26

15231.49

17417.35

24954.10

21052.00

13969.93

14612.01

16588.15

18836.41

26953.80

22971.40

9539.34

17959.20

15916.03

16999.79

17334.20

31783.60

Cash Profit

Free Cash flow

Debt to Equity(x)

Last 4-years average (2016-2019)

0.76

0.05

0.04

0.07

0.20

0.00

0.02

ROCE(%)

43.78

53.69

74.73

100.68

146.44

103.92

105.53

RONW(%)

56.50

61.95

63.71

84.57

137.30

87.76

75.52

15.51

14.02

15.03

15.55

14.88

15.82

20.74

PATM(%)

10.38

10.60

11.42

11.68

11.39

11.40

13.58

CPM(%)

12.08

11.70

12.43

12.63

12.30

12.44

14.86

PBIDTM(%)

Adjusted EPS (TTM) Market price (Rs) Trailing 12-M P/E

5.49

5.99

6.89

7.98

9.14

9.61

30.50

143.50

197.25

220.30

215.95

238.20

240.75

2008.80

26.14

32.93

31.98

27.06

26.06

25.04

65.86

CAGR in earnings over the period CAGR in share price during the period

11.3%

13.01

10.4%

25.02

Source: ACE Equity

There was nothing to suggest that HUL suffered from “poor quality” between 2004 to 2010. But its PE multiple, after 6 years of sterling performance, stood at 25, well below its long-term average of 32. Today, the same HUL trades at a PE multiple of over 50 times forward earnings, while its financial performance (as shown in the Table) has only been in line with its earlier performance. Our point is that the company’s quality has been around for decades!

The fact is that during this period of 2004-2010, other stars shone more brightly, and that made many people blind to stocks like HUL. Stocks in the Infrastructure, Real estate, Power and energy sectors were the hot favourites during this period. The fact also is that HUL stock was subjected to the iron law of reversion to the mean.

Nestle India Ltd – same rule applies Nestle India Ltd - Valuation history (1996-2019) 140

120

100

80

60

40

20

1-Jan-96 21-May-96 3-Oct-96 20-Feb-97 7-Jul-97 20-Nov-97 3-Apr-98 18-Aug-98 1-Jan-99 20-May-99 27-Sep-99 8-Feb-00 21-Jun-00 31-Oct-00 12-Mar-01 20-Jul-01 5-Dec-01 17-Apr-02 26-Aug-02 8-Jan-03 22-May-03 29-Sep-03 6-Feb-04 17-Jun-04 25-Oct-04 7-Mar-05 13-Jul-05 26-Nov-05 10-Apr-06 17-Aug-06 27-Dec-06 15-May-07 20-Sep-07 30-Jan-08 16-Jun-08 27-Oct-08 17-Mar-09 30-Jul-09 11-Dec-09 29-Apr-10 3-Sep-10 13-Jan-11 27-May-11 7-Oct-11 17-Feb-12 28-Jun-12 8-Nov-12 20-Mar-13 31-Jul-13 13-Dec-13 29-Apr-14 9-Sep-14 27-Jan-15 10-Jun-15 20-Oct-15 2-Mar-16 18-Jul-16 30-Nov-16 12-Apr-17 23-Aug-17 3-Jan-18 18-May-18 28-Sep-18 11-Feb-19 27-Jun-19 13-Nov-19

0

P/E

Source: ACE Equity

6 | PMS & AIF SPECIAL EDITION JAN 2020

Average P/E

The chart above depicts Nestle India Ltd’s valuation history from 1996-2019. The spike in valuation seen in 2015 was because the stock price did not fall as much as the earnings fell at the time of the Maggi controversy. Despite this spike in valuation in 2015, the long-term average valuation for Nestle is 37.5. The stock today is quoting at a valuation of 60+.

The same Nestle, that was quoted at a valuation of nearly 60 times earnings in 1999, fell to a valuation of below 20 in 2004. Was Nestle displaying any lower quality or competitiveness in 2004? The fact is that the rule of reversion to mean was at play.

That reversion to mean that happened between 1998 to 2004 in case of HUL and Nestle, again was at play after 2008 in both cases. It is just that their valuations have now gone far above the mean.

Another stock, another industry – same rule

Infosys Ltd Valuation history of Infosys Ltd - (2003-2019) 35.00

30.00

25.00

20.00

15.00

10.00

5.00

1-Apr-03 25-Jun-03 16-Sep-03 5-Dec-03 1-Mar-04 25-May-04 13-Aug-04 4-Nov-04 31-Jan-05 25-Apr-05 13-Jul-05 6-Oct-05 30-Dec-05 28-Mar-06 21-Jun-06 11-Sep-06 4-Dec-06 1-Mar-07 28-May-07 17-Aug-07 8-Nov-07 31-Jan-08 29-Apr-08 22-Jul-08 16-Oct-08 14-Jan-09 16-Apr-09 9-Jul-09 1-Oct-09 29-Dec-09 25-Mar-10 17-Jun-10 7-Sep-10 30-Nov-10 22-Feb-11 19-May-11 9-Aug-11 4-Nov-11 30-Jan-12 24-Apr-12 13-Jul-12 8-Oct-12 2-Jan-13 25-Mar-13 19-Jun-13 12-Sep-13 6-Dec-13 28-Feb-14 28-May-14 20-Aug-14 20-Nov-14 12-Feb-15 12-May-15 31-Jul-15 27-Oct-15 20-Jan-16 20-Apr-16 12-Jul-16 5-Oct-16 29-Dec-16 24-Mar-17 19-Jun-17 12-Sep-17 5-Dec-17 28-Feb-18 25-May-18 16-Aug-18 14-Nov-18 6-Feb-19 7-May-19 29-Jul-19 27-Oct-19

-

P/E

Average P/E

Source: ACE Equity

Infosys fell sharply between 2007 and 2008. Was there any difference in the quality of Infosys between 2007 and 2008? The figures suggest otherwise.

Infosys Ltd., Financial Highlights - Consolidated - [INR - Millions] Description

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Gross Sales

71 300

95 210

1 38 930

1 66 920

2 16 930

2 27 420

Total Income

72 540

97 530

1 42 650

1 73 980

2 26 070

2 36 870

PBIDT

24 600

32 300

47 620

59 430

76 710

88 060

PBIT

21 730

27 930

42 480

53 450

69 100

79 010

PAT

18 460

24 790

38 610

46 590

59 880

62 180

Cash Profit

21 330

29 160

43 750

52 570

67 490

71 230

Free Cash Flow

6 260

17 060

23 880

31 530

49 620

64 080

0

0

0

0

0

0

ROCE(%)

50.17

45.47

46.63

42.67

43.12

38.26

RONW(%)

43.57

40.67

42.38

37.2

37.37

30.11

PBIDTM(%)

34.5

33.93

34.28

35.6

35.36

38.72

PATM(%)

25.89

26.04

27.79

27.91

27.6

27.34

CPM(%)

29.92

30.63

31.49

31.49

31.11

31.32

4.27

5.57

8.41

10.18

13.09

13.59

Key Ratios Debt to Equity

Adjusted EPS Source: ACE Equity

PMS & AIF SPECIAL EDITION JAN 2020 | 7

Between 2006 and 2010, Infosys Ltd increased its net profits from Rs.2479 crores to Rs.6218 crores. Its free cash flow increased from Rs.1706 crores to Rs.6408 crores during the same period.

It remained a debt free company throughout. Its PAT margins increased from 26.0% to 27.3%, and its EBITDA margin increased from 33.9% to 38.7%, and its EPS rose from Rs.5.6 to Rs.13.6.

The stock fell from Rs.297 in February 2007 to Rs.170 in March 2008 (much before the Lehman crisis had hit).

Interestingly, the same Infosys had grown its earnings by a stupendous 35.7% per annum between 2000 and 2006. But during this period, the stock gave only a CAGR return of 4.2% per annum.

Why? Not because of any deterioration in quality. It was just heeding the iron rule of reversion to mean.

Let’s now take a look at two more strong companies that are at the opposite ends of the “reversion to mean” spectrum:

ITC Ltd ITC Ltd - Valuation history (2002-2019) 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00

Source: ACE Equity 1-Apr-02 15-Jul-02 31-Oct-02 18-Feb-03 6-Jun-03 19-Sep-03 2-Jan-04 21-Apr-04 4-Aug-04 18-Nov-04 7-Mar-05 20-Jun-05 5-Oct-05 23-Jan-06 15-May-06 25-Aug-06 11-Dec-06 2-Apr-07 18-Jul-07 1-Nov-07 15-Feb-08 9-Jun-08 23-Sep-08 15-Jan-09 13-May-09 25-Aug-09 14-Dec-09 6-Apr-10 20-Jul-10 2-Nov-10 17-Feb-11 7-Jun-11 22-Sep-11 10-Jan-12 27-Apr-12 9-Aug-12 29-Nov-12 14-Mar-13 2-Jul-13 21-Oct-13 4-Feb-14 27-May-14 11-Sep-14 5-Jan-15 24-Apr-15 7-Aug-15 27-Nov-15 15-Mar-16 4-Jul-16 24-Oct-16 7-Feb-17 29-May-17 13-Sep-17 29-Dec-17 19-Apr-18 2-Aug-18 26-Nov-18 12-Mar-19 2-Jul-19 23-Oct-19

-

Bajaj Finance Ltd

P/E

Average P/E

Bajaj Finance Ltd - valuation history (1996-2019) 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00

15-Apr-96 23-Aug-96 15-Jan-97 30-May-97 8-Oct-97 23-Feb-98 22-Jul-98 10-Dec-98 5-May-99 10-Sep-99 24-Jan-00 8-Jun-00 24-Nov-00 18-Apr-01 17-Sep-01 11-Feb-02 20-Jun-02 30-Oct-02 12-Mar-03 21-Jul-03 21-Nov-03 1-Apr-04 9-Aug-04 15-Dec-04 25-Apr-05 29-Aug-05 5-Jan-06 19-May-06 21-Sep-06 1-Feb-07 13-Jun-07 18-Oct-07 22-Feb-08 7-Jul-08 17-Nov-08 1-Apr-09 13-Aug-09 23-Dec-09 7-May-10 9-Sep-10 17-Jan-11 27-May-11 4-Oct-11 13-Feb-12 20-Jun-12 29-Oct-12 6-Mar-13 15-Jul-13 25-Nov-13 1-Apr-14 12-Aug-14 29-Dec-14 11-May-15 11-Sep-15 25-Jan-16 7-Jun-16 18-Oct-16 22-Feb-17 5-Jul-17 13-Nov-17 22-Mar-18 30-Jul-18 12-Dec-18 23-Apr-19 3-Sep-19

-

P/BV

Average P/BV

Source: ACE Equity

Both of these are strong companies, and both of these are trading at valuations vastly different from their historical mean, one below, and the other above it.

We leave it to the reader to judge whether the rule of reversion to mean would catch up with these two stocks, or they would be exempted from it.

“Reversion to mean is the iron rule of the financial markets” 8 | PMS & AIF SPECIAL EDITION JAN 2020

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BOOKSHELF CLASSIQUE

BEATING

THE STREET PETER LYNCH

An Introduction of Beating the Street by Peter Lynch Simon & Schuster Paperbacks, New York, 1993 ISBN – 13: 978-0-671-75915-5

T

his book, which first came out in 1993, is perhaps akin to a computer’s CPU, because multithreading is what the author does best. Peter Lynch, a topranked and well-known former head of Fidelity Magellan, a U.S.-domiciled mutual fund, speaks quite personally to you in this interestingly titled book, “Beating the Street”. Though this book completely deals with the Wall Street and its concomitant typescripts, the wise lessons from Peter Lynch is unequivocal, as the cover states: “An important thing to investing is to remember that stocks are not lottery tickets”.

Filled with helpful anecdotes, calculations and tables, and most importantly, well thought-out advice, Beating the Market,

10 | PMS & AIF SPECIAL EDITION JAN 2020

is an easy-to-read book that aids the reader to appreciate the simple nuances of understanding a company, before taking a call to invest in it.

As a reader, one more important facet of the book that you will notice is that the author has come up with worthwhile aphorisms, which he rightly calls, Peter’s Principles.

You would discover 21 such principles, and a few of them do stand out rather starkly, for their originality and freshness. For instance, take Peter’s Principle # 11: The best stock to buy may be the one you already own.

Several times, Lynch’s take on how to select companies may be termed counterintuitive too. An insightful example would be: “I’m always on the lookout for great companies in lousy industries. A

great industry that’s growing fast, such as computers or medical technology, attracts too much attention and too many competitors.” (Page 182). He continues with his strain of logic, when he proclaims that in a “lousy industry, one that’s growing slowly if at all, the weak drop out and the survivors get a bigger share of the market”.

This brings us to Peter’s Principle # 16: In business, competition is never as healthy as total domination.

Reasonably overflowing with names of companies like Shaw Industries, Cooper Tires, Phelps Dodge, among others, that are intrinsically American in character, Peter Lynch provides hind-sight guidance and information on these companies, with a view to appreciate the uniqueness of their business operations. In all the case, Lynch always strives hard to make a mention of the people behind the management of the company. He is adamant is his views that it is the people at the helm of affairs who make or mar companies. When writing about a niche-player called Bandag, which retreads tires, Lynch pronounces quite confidently, that no one will find the CEO of this company, “…sipping champagne in the courtyard at the Trump Plaza Hotel”.

According to him, Great Companies have such enlightened Management.

Towards the end of the book, Peter Lynch lists out his 25 Golden Rules, which are “the most important lessons from two decades of investing”. The 19th Rule runs like this: Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Keeping the best to the last, Lynch’s book is more about perspective than about dishing out raw advice. As Henry Thoreau said many years ago: “It’s not what you look at that matters, it’s what you see”, Peter’s Principle # 19 echoes a similar sentiment: Unless you’re a short seller or a poet looking for a wealthy spouse, it never pays to be pessimistic.

We would suggest that you immerse yourself in this book, in case you have not read it. However, in case you are already familiar with Peter’s book, we would strongly propose you to take it back from the shelf and re-read it. At times like these, a classic book of this stature, will act as a soothing medication. Time spent reading this book, is time well spent!

Research Team PMS bazaar

PMS & AIF SPECIAL EDITION JAN 2020 | 11

Toppers of Tumultuous Times `

The Calendar year 2019 has been a challenging year for India, primarily because of geopolitical, macroeconomic and social unrest reasons. The year witnessed broader market underperformance, while select few franchises performed better.

While we concede that a single year will not do justice to the performance of longterm investments, curiosity prevailed, and hence we have analysed the PMS Strategies during the calendar year 2019, a particularly tumultuous period. There were 111 strategies which have completed one year within the PMS Bazaar’s universe. The overall data appears quite satisfactory and is graphically represented as Exhibit – 1.

Exhibit-1 PMS- Calendar Year-2019 - Performance Completed one year |Total = 111 Strategies| GREATER THAN 25 %

4

ABOVE 20% AND UPTO 25%

10

ABOVE 15% AND UPTO 20 %

12

ABOVE 10% TO UPTO 15%

28

ABOVE 6% AND UPTO 10%

14

ABOVE 1% AND UPTO TO 6%

15 7

BETWEEN -1% TO PLUS+ 1%

16

FROM -1% AND UPTO -10% 3

FROM -10% AND UPTO -15% 1

FROM -15% AND UPTO -20% 0

FROM -20% AND UPTO -25%

1

GREATER THAN - 25% 0

5

10

15

20

25

30

From the Exhibit-1, it is encouraging to note that 74.77% of the PMS Strategies have given positive returns. What is even more reassuring is that out of these, 48.65% have returned double-digit growth. Less than 20% of the strategies turned out negative.

PMS bazaar, on behalf of the Investor Community, appreciates the Top performers. It is with lots of pride that we recognize their performance, and we have awarded the Top-3 Performers of the calender year-2019.

Top-3 Performers of year-2019

Strategy Consistent Compounders

Strategy Multi Cap PMS

Strategy Stallion Asset Core Fund

Year - 2019 Return 27.40%

Year - 2019 Return 27.25%

Year - 2019 Return 26.46%

12 | PMS & AIF SPECIAL EDITION JAN 2020

Marcellus Consistent Compounders Marcellus Investment Managers was founded in 2018 with the sole purpose of influencing efficient capital allocation in the Indian economy. Marcellus is intended to achieve this by channelizing household savings towards high quality Indian companies with long track records of clean governance and strong capital allocation.

Marcellus focuses on delivering healthy returns while aiming to provide relatively low risk. Marcellus’ core investment management team has been together for more than 15 years and their journey and learning over the years underpin their investment management philosophy.

The investment approach of Marcellus 1. Filter Based Portfolio:

a. By filtering-in companies with the history of very consistent fundamentals, it is ensured that the DNA is not affected by any disruptive changes inside or outside, due to their strong competitive moats. Such DNA sustains over the subsequent 5-10 years.

b. Long-term-holding for 10 years or more allows the power-of-compounding of the winning stocks dominate losing stocks (if any) to inconsequential Levels.

c. Low churn portfolio can be maintained through proper filter-based approach. This would reduce transaction cost as well as the taxes. Hence, the returns will be boosted by more than 120 bps CAGR, thus generating better returns over longer period of time.

2. Bottom-up deep dive research: This is achieved through 3 types of interventions: a. Portfolio Concentration Filter creates long-list of stocks (of about 20).This dilutes the

reliance on the portfolio on outstanding companies. Manual intervention is done to produce

more concentrated portfolio. b. Though the filter approach demands “consistent-performance”, manual intervention is beneficial to ignore “temporary-blips” in the Business cycle. Such companies are added or

retained in the portfolio, through manual intervention. c.

Filter based portfolio has identified companies in the housing finance, which were great performers in the past 10 years due to macro-tailwinds. The logical analytical acumen of more than 14 years’ experience in the financial markets cautions that this performance may not be sustainable; such filters are avoided through manual intervention.

Mr. Rakshit Ranjan, is the Portfolio Manager of Consistent Compounders. He is a B.Tech., from IIT (Delhi) and is a CFA Charter holder. He has more than 15 years of experience in Equity Analysis and Portfolio Management and served in many prestigious MNCs.

The Performance of Consistent Compounders Portfolio 1 Month

3 Months

6 Months

1 Year

Since Inception

Inception Date

2.90%

6.10%

23.20%

27.40%

29.80%

1-Dec-18

As on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 13

IIFL Multi Cap PMS IIFL Asset Management Limited(IIFL AMC) is an India-focused, global asset management firm. Their endeavor is to create investment products that generate sustainable risk-adjusted returns. IIFL’s differentiated suite includes Mutual Funds (MFs), Portfolio Management Services (PMS) and Alternate Investment Funds (AIFs) spanning across public and private equity, private fixed income and real estate.

During the year 2019, IIFL made significant investments in technology and people. IIFL AMC’s structure, with significant employee ownership, empowers people. Their investment edge is derived from a strong, resilient team that is adept at identifying high-yield opportunities and proactively recognizing evolving macroeconomic trends.

IIFL – Multi-cap – PMS Only 20-25 High quality companies are selected for investment. These companies should be helmed by Effective Business Leaders, which have a robust Management architecture, with low leverage and offering large margin-of-safety. Focus will be on 2to4 High conviction sectors, based on the current economic outlook. There will be a mix of Top-down & Bottom-up approach. The strategy targets superior outperformance over the bench mark through concentrated positions.

Fundamental selection &Valuation rules to construct the portfolio 1.

2.

3.

4.

Easily understandable Business model, which should have large addressable market.

Ability to sustain downturn-cycle and turn-around rapidly.

Quality Management & Sizeable Promoter Holding.

Consistent growth rate of 12% to 20 % CAGR, and outperforming the peers by wide margin and the revenue growth should match the EPS. 5. Low earning volatility.

6. Return on Equity - Greater than 15% and Return on Invested Capital - greater than 10% 7. Debt : Equity ratio less than 0.5 x 8. PEG ratio less than 1x 9. Revenue growth should match the EPS. 10. Risk: Return pay-off should be at least 1 : 3 Mr. Aniruddha Sarkar is the Portfolio Manager of IIFL-Multi Cap Strategy. He holds an MBA in Finance from IMI, New Delhi and a Bachelor’s Degree in Commerce from St. Xavier’s College, Kolkata. He has over 11 years of experience in Capital Markets across different roles in Fund Management, Portfolio Management (PMS), Equity Research and Investment Advisory.

The Performance of IIFL – Multi Cap PMS 1 Month 2.46%

3 Months

6 Months

1 Year

2 Year

3 year

5 Year

7.32%

9.37%

27.25%

12.99%

18.28%

19.09%

As on 31st Dec 2019

14 | PMS & AIF SPECIAL EDITION JAN 2020

Since Inception 19.09%

Inception Date 1-Dec-14

Stallion Asset Core Fund Stallion Asset Private Limited is a SEBI Registered (INP000006129) Portfolio Management Services companyfollowing growth investing as its core philosophy. Stallion Asset specializes in buying high quality midcap companies that are often ignored by the analyst community. Stallion Asset aims to create long term wealth, through their unique & back tested investment philosophy of catching the trend and managing the risk.

Investment Philosophy 1. Buy and Rotate Strategy beats Buy and Hold strategy.

2. Every Bull Market has a Different leader; find the leader in every Bull Market and stick to it.

3. There is No Bull Market without Earnings Growth; always buy sectors with high expected sustainable growth of more than 20% for next 3-5 years.

4. Winners of Previous Bull Market will not lead the next Bull Market.

5. Prefer buying companies that are making 52-week Highs, rather than new 52-week lows.

6. The more market believes in the longevity of growth, the more valuations the stock gets.

Longevity is often the mispriced portion in Capital markets.

Portfolio Construct – the 3 part divide 1. Core Portfolio: 40% to 60% - Highest Quality Leaders in their sectors with high expected growth for next 3-5 years.

2. Trends Portfolio:20% to 40% - Every Bull market has different leaders distinct from the previous Bull Market. Riding these sector trends on identifying them helps to deliver Alpha.

3. Special Situations: 10% - Focused mainly on Demergers, Buy Backs, Spinoff, etc.

Variable weightage & Style befitting the Market Cycle: Investment in the Bull Market is very different from investment in the Bear Market. In the Bear Market, focus is more on the core portfolio i.e. high-quality compounders, great free cash flow, leaders, etc., whereas, in the Bull Market, ideally increase portfolio Beta, adding more weight to the Trends segment.

Risk Mitigation Measures: (1) Margin of Safety: Companies with limited downside risk & upside left open are only added. (2) Price Action on the Trend Portfolio: Fundamentals & Technical analysis is used for entry & exits. (3) Pre-Determined Exits Based on Valuations. (4) Diversification.

Principal Officer: Mr. Amit Jeswani is the Founder & Chief Investment Officer at Stallion Asset. He is a Double Charter, CFA (Virginia, USA) and CMT (New York, USA), and a graduate in Business with finance from Kingston University London. He has more than 13 years of investment experience and equity advisory before he found the Stallion Asset.

The Performance of Stallion Asset – Core Fund 1 Month

3 Months

6 Months

1 Year

Since Inception

Inception Date

-0.19%

6.99%

14.40%

26.46%

28.92%

22-Oct-18

As on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 15

16 | PMS & AIF SPECIAL EDITION JAN 2020

PMS & AIF SPECIAL EDITION JAN 2020 | 17

MAVENS OF MANAGEMENT

PMS & AIF

18 | PMS & AIF SPECIAL EDITION JAN 2020

PMS bazaar has been consistently imbibing relevant knowledge and data to enable investors to make informed decisions. In this special edition we have initiated comprehensive coverage of PMS & AIF Managers.

As the first set of coverage, we have covered PMS & AIF Managers with the Assets Under Management (AUM) in the range of INR 50 to 500 Crore, in this issue. We hope this comprehensive coverage will augur well for your journey from Million to Billion.

PMSbazaar Research Team

PMS & AIF SPECIAL EDITION JAN 2020 | 19

INVESTMENT TEAM

PMS

2POINT2 CAPITAL ADVISORS LLP

393

2Point2 Capital

was co-founded by Amit Mantri and Savi Jain. They have a combined investing experience of 20+ years, primarily in the private equity and hedge fund industry.

2Point2 Capital is an investment firm that focuses on taking concentrated bets for the long term in high quality publicly listed Indian companies at reasonable valuations. As investment managers, our primary goal is to protect capital followed by our goal to generate returns that exceed the equity index return over the long term.

INVESTMENT PHILOSOPHY

Investors

INR

545

Our investment philosophy is guided by the value investing principle of buying a security at a discount to its intrinsic value. When we invest in a stock, we buy the business and not the stock. We remain agnostic to the daily fluctuating stock price as long as we continue to believe in the business. We view market volatility as a friend that allows us to buy securities at a discount or sell at a premium to intrinsic value.

NUMBER OF STRATEGIES OFFERED

Fee Structure Fixed Fee AMC

Variable fee or

AMC

Hurdle

1.50%

10%

1st Year

2nd Year

3rd Year

3%

0%

0%

NA Exit Load

SEBI Regn. No.INP000005190 20 | PMS & AIF SPECIAL EDITION JAN 2020

Crores

Total AUM

Profit Sharing 15% Profit sharing above 10% Hurdle

INVESTMENT TEAM Fund Management

4

1

Research

2

Data as on 31st Dec 2019

THEME

2POINT2 LONG TERM VALUE FUND 2Point2 Long Term Value Fund focuses on taking concentrated bets for the long term in high quality publicly listed Indian companies at reasonable valuations.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Amit has 10 years of investing experience across private equity and public markets. In his last role, he was Vice-President at Hornbill Capital, a Mumbai-based hedge fund.

He was also part of the private equity teams at Zephyr Peacock and IDFC Alternatives.

Savi has 11 years of experience in the asset management industry, more than 6 years of which were in the private equity Industry. In his last role, he was an Associate Director at Tano Capital, a prominent Mumbai-based private equity fund that manages more than USD 210 million worth of assets.

1 year

2 years

3 years

5 years

Since Inception

MidCap MidCap MidCap MidCap MidCap Strategy Nifty- 50 Strategy Nifty- 50 Strategy Nifty- 50 Strategy Nifty- 50 Strategy Nifty- 50 Performance 100 100 100 100 100

14.3% 13.5% -3.4% 8.1%

9.0%

-9.2% 20.3% 15.6%

7.2%

NA

NA

NA

18.9% 12.3%

6.7%

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Inception Date

20-Jul-16

Data as on 31st Dec 2019

Benchmark

Our investment edge stems from our deep fundamental research in the companies we invest in. We rely heavily on primary research spread over several months including extensive on-ground checks (customers, competitors and ex-employees). We employ forensic analysis skills to weed out bad investments. Our ability to stay away from the noise of the investing community ensures that we have a portfolio very different from the typical PMS or mutual funds. This also ensures that the valuations we pay are far lower than the rest of the market as many of these companies are not well-discovered.

Nifty-50 & MidCap 100

Average Marketcap

4654 Cr.

INR

Total number of

15

Stocks

PMS & AIF SPECIAL EDITION JAN 2020 | 21

INVESTMENT TEAM

PMS

Total AUM

INR

444 Crores

Investors

ADITYA BIRLA MONEY LTD

817

Aditya Birla Money Ltd is a SEBI registered Portfolio Manager, located at Mumbai. There are

3 fund managers from which Mr. Vivek Mahajan – Chief Fund Manager has over 25 years work experience spanning Equity Sales and Equity Research. Mr. Avinash Nahata – Fund Manager has over 20 years of experience in Equity Research and advisory. Mr. Naveen Baid – Senior Analyst has over 14 years of industry experience

INVESTMENT PHILOSOPHY Portfolio Management Service (PMS) by Aditya Birla Money Limited (ABML) is a customized investment management and advisory platform that caters to varied needs for niche segment of clients/investors seeking long term wealth generation with special cognizance of their risk profile. The investment philosophy focuses on long term wealth creation by participating in the multi-decade structural India growth story, through investment in India’s finest businesses, with unparalleled economic moat. The portfolios also aim to benefit from irrational (but transient) movement in asset prices, reflecting the nimble-footed approach to portfolio management.

Fee Structure Strategy Name

Fixed Fee

Variable fee

AMC

ABM Core & Satellite

2.25%

ABM India Consumption Fund

2.50%

Exit Load

SEBI Regn. No. INP000003757

22 | PMS & AIF SPECIAL EDITION JAN 2020

AMC

Hurdle

NA

NA

NA

NA

1st Year

2nd Year

3rd Year

3%

2%

1%

or

Invesment Team Fund Management

3

Profit Sharing

NA

Investment Committee

NUMBER OF STRATEGIES OFFERED

3

2

Research

6

Data as on 31st Dec 2019

ABM CORE &

TH E M E

SATELLITE ABM Core & Satellite portfolio follows a dual approach to portfolio

MULTI CAP

management, i.e. CORE & SATELLITE. The Core portfolio aims to benefit from secular earnings growth story, and Satellite portfolio aims to benefit from irrational (but transient) market behaviour & special situations driven opportunities.

PROFILE OF PORTFOLIO MANAGER Mr. Vivek Mahajan has over 25 years work experience spanning Equity Sales and Equity Research. Vivek has handled institutional and Ultra HNI customers at IIT InvesTrust Ltd, HDFC Securities, IL & FS InvestDirect and HSBC Invest Direct - some of the top Institutional Brokerages. Vivek is an Engineer with Mr. Vivek Mahajan

post graduation qualification in Management 1 year

Performance Standard Deviation

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

7.60%

10.40%

-6.90%

5.70%

12.30%

13.50%

NA

NA

10.10%

8.20%

13.90%

11.30%

18.10%

13.50%

17.10%

12.50%

NA

NA

16.90%

13.20%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.11

-0.71

0.37

NA

0.24

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Benchmark

Given the unprecedented challenging environment encircling equity investments, the ABM Core & Satellite portfolio is optimally geared to help you navigate through the noise and build your portfolio for the future, taking advantage of India’s secular growth story, besides also taking opportunistic advantage of the sporadic swings.

CNX

100

Inception Date

Total number of

Stocks

Average Marketcap

129353Cr.

INR

15 20 -

20-Apr-15

Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 23

INDIA CONSUMPTION

TH E M E

PORTFOLIO

A multi-cap fund which invests in direct and in direct consumption

MULTI CAP

plays of the country, thereby creating a unique one of its kind portfolio, which seeks to participate in wide variety of consumption growth stories in the country.

PROFILE OF PORTFOLIO MANAGER Mr. Vivek Mahajan has over 25 years work experience spanning Equity Sales and Equity Research.

Vivek has handled institutional and Ultra HNI customers at IIT InvesTrust Ltd, HDFC Securities, IL & FS InvestDirect and HSBC Invest Direct - some of the top Institutional Brokerages. Vivek is an Engineer with post graduation qualification in Management

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

NA

NA

NA

NA

NA

NA

NA

NA

Strategy

Benchmark

8.80%

9.30%

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Inception Date

16-Jan-19

24 | PMS & AIF SPECIAL EDITION JAN 2020

Benchmark

India is extremely underpenetrated in most metrics like per capital consumption in cements, healthcare spending, number of vehicles per 1000 people, etc. Given the opportunity, the next decades of growth will be aided by population expansion and by urbanization and within the population pyramid, millennials will be the key drivers in consumption. Within financial savings, equity is a small part of the portfolio, as compared to the rest of the world, thereby making equitization of savings a potential trigger in years to come.

BSE

200

Total number of

Average Marketcap

147000Cr.

INR

Stocks

12 15 -

Data as on 31st Dec 2019

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AVESTHA

FUND MANAGEMENT LLP

INR

45

Avestha Fund Management’s investment objective is Long Term Wealth Creation through investment in quality stocks to capitalize on asymmetric risk-reward. Our investment decisions will find principal basis in Balance sheet strength, Promoter history, Capital efficiency and Business Scalability/Growth runway.

INVESTMENT PHILOSOPHY

Fee Structure Fixed Fee or

AMC

Hurdle

Profit Sharing

1.00%

5.00%

1 Year

2 Year

3 Year

Nil

Nil

Nil

5% of the gains earned on the portfolio with high watermark

NA st

Exit Load

NUMBER OF STRATEGIES OFFERED

Variable fee

AMC

nd

rd

INVESTMENT TEAM Fund Management SEBI Regn. No.INP000005810

26 | PMS & AIF SPECIAL EDITION JAN 2020

Crores

is a SEBI registered Portfolio Manager, located at Mumbai. Mr Farokh Pandole and Mr Chaitanya Kamdar, have near to 4 decades of experience focused specifically on Indian Equity Markets. We run a concentrated portfolio (12-15 holdings), having low portfolio turnover since our style is to buy-and-hold. We are sector agnostic as our stock selection approach will be bottom-up.

A recurring theme across our portfolio is the aspiration for companies to have a transformation theme embedded within the investment rationale

140

Total AUM

Avestha Fund Management

Investors

INVESTMENT TEAM

PMS

2

Investment Committee

2

1

Research

3

Data as on 31st Dec 2019

THEME

AVESTHA GROWTH Long Term Wealth Creation through investment in quality stocks to capitalize on asymmetric risk-reward. Our investment decisions will find principal basis in Balance sheet strength, Promoter history, Capital efficiency, Business Scalabilityz/ Growth runway and Transformation potential. We believe such a theme affords good risk-reward characteristics, provides downside support and encourages long term returns. Furthermore, equity risk is mitigated through longer holding periods and high-quality businesses.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Mr. Pandole graduated with Honors in Economics from Harvard College in 1992.

He gained an MBA in Finance from The Wharton School in 1995. He is a former Junior National Squash Champion.

Mr. Pandole was Vice-President and member of the core investment team at Alliance Capital MF between 1995-2000.

Mr. Pandole moved to the sell-side, from 2000-13 at Citigroup and BofA-ML. Mr Farokh Pandole

Recently he was Equity Portfolio Manager at HDFC Life, generating substantial outperformance.

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

10.95%

-4.33%

3.89%

-17.74%

NA

NA

NA

NA

5.60%

-12.67%

Standard Deviation 15.48%

16.50%

15.58%

18.54%

NA

NA

NA

NA

15.07%

18.46%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.84

0.21

NA

NA

0.34

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

01-Nov-17

Data as on 31st Dec 2019

Benchmark

Our strategy describes what we believe constitutes quality.

We feel investing in such quality businesses allows for both long term wealth creation and a defensive positioning when markets are weak. Moreover, quality allows us to be patient when a holding faces external or internal pressures, confident that recovery from such pressure has a high probability. Being concentrated forces high barrier to entry within the portfolio while maintaining position sizes that positively influence returns longer-term

Nifty Mid 100

Average Marketcap

22000Cr.

INR

Total number of

12-15

Stocks

PMS & AIF SPECIAL EDITION JAN 2020 | 27

INVESTMENT TEAM

PMS

Total AUM

105

INR

Crores

75

BUOYANT CAPITAL

Investors

PRIVATE LIMITED

Buoyant Capital Private Limited is a SEBI registered Portfolio Manager, located at Mumbai.

The investment team (co-founders), Mr. Sachin Khivasara, Mr. Jigar Mistry and Mr. Viral Berawala (with great padegogical pedigree - IIM A, CA, CFA) have close to 2 decades of invesment mangement experience; across the spectrum of Asset Management (from being Chief Investment Officer to senior analyst to associates) at various prestigious organisations (including HSBC Bank, Nippon India Mutual Fund and Reliance Nippon Life Insurance). Besides investment experience, they bring a unique investment approach and believe in having a significant skin in the game.

INVESTMENT PHILOSOPHY Key belief is that ‘one formula that can beat the benchmark at all possible cycles’ does not exist.

Their investment framework relies on optimising portfolio stance based on market conditions; and effectively operate while balancing investments within their four quadrant framework. This theory has facilitated Buoyant to generate industry leading (top PMS on 3 year basis) over 17% post tax CAGR since inception (Jun 2016)

Fee Structure Fixed Fee

Variable fee

AMC

or

AMC

Hurdle

1.50%

13.5%

1 Year

2 Year

3rd Year

0%

0%

0%

2.00% st

Exit Load

SEBI Regn. No. INP000005000

28 | PMS & AIF SPECIAL EDITION JAN 2020

nd

Profit Sharing 20% Profit sharing above 13.5% Hurdle

Invesment Team Fund Management

2

NUMBER OF STRATEGIES OFFERED

Research

1

3

Data as on 31st Dec 2019

BUOYANT CAPITAL

TH E M E

OPPORTUNITIES FUND The Buoyant Opportunities investment starts with a premise that ‘One investment formula cannot work in all market cycles’. We have divided the investment pool in four quadrants (BMV, Cyclial, Turnaround and Value) and optimise our investments in each bucket based on how businesses are offered to us at different market cycles. The theme is effectively implemented across individual accounts through the use of pool approach (rather than model portfolio), through effective monitoring of (a) Weighted average market-cap, (b) Cash calls and (c) Mix of small and mid cap vs large caps. We believe this theme generates better cross-cycle returns as evidenced by over 17% post expense returns since inception (3-yr CAGR over 20%, making it the best PMS product as listed by PMS Bazaar)

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Buoyant Opportunities fund is actively managed by Mr. Sachin Khivasara, a Chartered and Cost Accountant by profession, Mr. Khivasara has worked in equity research and fund management over the last 20 years in various capacities. He started his career working with a family office; later moving on to track stocks and sectors with one of the largest mutual funds at the time.

Mr. Sachin Khivasara 1 year

2 years

3 years

5 years

Since Inception

Performance

Strategy

7.10%

9.60%

-7.50%

5.30%

20.90%

13.90%

NA

NA

17.20%

11.50%

Standard Deviation

18.48%

13.72%

19.37%

13.30%

19.00%

12.16%

NA

NA

19.59%

12.38%

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.2

(0.6)

1

NA

0.83

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

1-Jun-06

Data as on 31st Dec 2019

Benchmark

The key strength of Buoyant Opportunities Fund lies in generating crosscycle alpha. We believe that statistical measures (Standard deviation and sharpe ratios included) do not do justice to measurement of risk. We see risks as (a) Risk of permanent loss of capital and (b) Opportunities cost.

During periods of extreme concentrated returns, we aim to protect capital and look to generate large alpha during distributed market returns.

Nifty

100

Total number of

Stocks

Average Marketcap INR

56000 Cr.

15 25 -

PMS & AIF SPECIAL EDITION JAN 2020 | 29

CapGrow Capital Advisors LLP

CapGrow Capital Advisors is a SEBI registered PMS located at Mumbai.

The firm was founded in July 2018

by Mr. Arun Malhotra and Mr. Rajesh Shah. Together, they have a combined experience of ~50 years in the capital markets space. Mr. Malhotra is the Fund Manager and has completed his M.B.A from FMS Delhi and a full-time M.B.A from The Simon School of Business, Rochester, New York.

He was an analyst for the life sciences fund at Manning & Napier, New York – a $26 Bn AMC. From 2005-2013, he was running a hedge fund in Mumbai and has generated superior returns across market cycles.

59 143 2 Crores

INR

NUMBER OF STRATEGIES OFFERED

Investors

Total AUM

INVESTMENT PHILOSOPHY

Our investment philosophy is to generate returns by investing in companies that could offer sustainable long-term capital appreciation and are available at reasonable valuations. The idea is to invest in wellestablished businesses across sectors with a bias to invest in well managed companies with strong fundamentals and high growth prospects.

Fee Structure Fixed Fee

Variable fee

AMC

or

1.50%

9%

1 Year

2 Year

3 Year

1.0%

0.5%

0.0%

Research

nd

SEBI Regn. No.INP000006147

30 | PMS & AIF SPECIAL EDITION JAN 2020

rd

Profit Sharing 20% Profit sharing above 9% Hurdle

5 1 Fund

st

Exit Load

Hurdle

Management

2.50%

AMC

Data as on 31st Dec 2019

INVESTMENT TEAM

PMS

THEME

GROWTH CapGrow thrives to generate long-term wealth for its clients by investing in Indian listed equities across various sectors and market cap (exceeding INR 1000 crs). Our endeavour is to invest in quality companies run by capable managements with superior capital allocation. Our expertise lies in finding such stocks, investing in them at resonable valuations and staying put throughout the investment horizon.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Mr. Arun Malhotra has over 25 years of experience in the capital markets. He has completed his M.B.A from FMS Delhi and a full-time M.B.A from The Simon School of Business, Rochester, New York. He was an analyst for the life sciences fund at Manning & Napier, New York – a $26 Bn AMC. From 2005-2013, he was running a hedge fund in Mumbai and has generated superior returns across market cycles.

Mr. Arun Malhotra

1 year

Performance Standard Deviation

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

7.44%

7.66%

NA

NA

NA

NA

NA

NA

9.51%

10.87%

13%

12%

NA

NA

NA

NA

NA

NA

12%

11%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.12

NA

NA

NA

0.28

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

31-Oct-18

Data as on 31st Dec 2019

Benchmark

NIFTY

500

Total number of

Average Marketcap INR

Our investment philosophy is to generate returns by investing in companies that could offer sustainable long-term capital appreciation and are available at reasonable valuations. The idea is to invest in well-established businesses across sectors with a bias to invest in well managed companies with strong fundamentals and high growth prospects.

100800 Cr.

30-35

Stocks

PMS & AIF SPECIAL EDITION JAN 2020 | 31

INVESTMENT TEAM

PMS

CARE

PORTFOLIO MANAGERS PRIVATE LIMITED

235

Care Portfolio Managers Private Limited (Care PMS) is a dedicated PMS company with a single line of business i.e.

PMS Services in Indian Listed equities. Care PMS is set up and managed by a team of chartered accountants with individual experience of more than 10 years in capital market. Promoters has a rich experience of evaluating a financial statements and understading of various businesses and are part of investment committee which is taking decisions related to investments.

We at Care PMS strongly believe in opportunities in Indian economy especially in listed equities and are focussed to cater to investors who wants to take benefit of this growth in building their wealth through our PMS Services

INVESTMENT PHILOSOPHY

Investors

INR

Fixed Fee

Variable fee or

AMC NA

NA

1 Year

2 Year

3 Year

1% OR perfrmance fees, whichever is higher

NA

NA

NA st

Exit Load

SEBI Regn. No.INP000004128 32 | PMS & AIF SPECIAL EDITION JAN 2020

689

To partner in a business by investing in equities and reap the benefits over a long period in form of value appreciation which are backed by growth in businesses.

Fee Structure AMC

Crores

Total AUM

nd

Hurdle rd

Profit Sharing 15% Profit sharing High water-mark principal

INVESMENT TEAM Investment Director

3

NUMBER OF STRATEGIES OFFERED

1

Research

3

Data as on 31st Dec 2019

THEME

CARE PMS GROWTH PLUS VALUE Investing into equities is like partnering with the promoter in their businesses by providing capital in form of equities. A bottom up approach for selecting a company followed with a detailed due diligence process based on four parameters like strong financials (Minimum or NIL debt), business growth potential for next 3-5 years, Management team, and valuation. We also allocate capital towards companies which are in restructuring phase or are into business of developing innovative product/solution.

SMALL & MID-CAP

A portfolio is constructed with 15-20 companies spread across 8-10 sectors. We keep concentrated portfolio by allocating higher capital to 7-8 companies.

PROFILE OF PORTFOLIO MANAGERS A team of chartered accountants with more than 40 years of combined experience in capital market and are promoters of Care PMS and managing funds of clients from inception.

Mr. Jayant Mamania - A Chartered Accountant with 20 years experience in Equity investment and managing clients funds.

Mr. Arpit Shah - A Chartered Accountant with 10 plus years experience in Equity Research, indepth understanding of businesses, portfolio construction.

Mr. Amit Doshi - A Chartered Accountant with 10 plus years of experience in Equity Research, Finance & Business management.

1 year

Performance

Strategy

-19.57% Standard Deviation

2 years

Benchmark

Not Disclosed

-6.85% Not Disclosed

Strategy

3 years

Benchmark

Strategy

-26.31%

-15.60%

-9.39%

Not Disclosed

Not Disclosed

Not Disclosed

5 years

Benchmark

Strategy

4.38%

3.54%

Not Disclosed

Not Disclosed

Since Inception

Benchmark

Strategy

4.32% 16.89% Not Disclosed

Not Disclosed

Benchmark

5.87% Not Disclosed

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

Not Disclosed

Not Disclosed

Not Disclosed

Not Disclosed

Not Disclosed

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date 19-Jul-11

Data as on 31st Dec 2019

Benchmark

The stock selection criteria is based on financial strength of companies which helps them in navigating tough business enviornment like economy slowdown, Liquidity crisis, etc.

As we give more emphasis on this aspect, our portfolio has low churning ratio in phases of market correction as companies continue to do their businesses without much challenge and hence see sharp price movement in market up cylce.

BSE

Small-Cap

Average Marketcap

7400Cr.

INR

Total number of

15 20

Stocks

-

PMS & AIF SPECIAL EDITION JAN 2020 | 33

Total AUM

INR

DALAL & BROACHA

PORTFOLIO MANAGERS PVT. LTD.

Investors

INVESTMENT TEAM

PMS

291

Crores

335

Dalal & Broacha was established in 1961 by Shri Priyakant Dalal. Today, it has a successful track record of over 5 decades in the financial services business. Based in Mumbai, the firm is a pan-India integrated financial services player offering a range of financial solutions and services to customers ranging from Equity Advisory, Portfolio Management Services, Distribution (Mutual Funds & other 3rd Party Products) and Fixed Income Securities. The firm’s core investment philosophy is to take a long-term approach to investments, avoiding any kind of speculative risk taking, so as to protect our clients’ capital and ensure steady growth at every opportunity.

INVESTMENT PHILOSOPHY Stock allocation Relative ranking in the Portfolio Timing Risk Controls Data based research process, to consider all sources of Alpha generation comprehensively Unbiased, disciplined investment approach.

Fee Structure AMC N/A

N/A

1st Year

2nd Year

3rd Year

0%

0%

0%

2.00% Exit Load

SEBI Regn. No. INP000001975

34 | PMS & AIF SPECIAL EDITION JAN 2020

Hurdle

2

Profit Sharing N/A

Fund

or

Research Research

AMC

Variable fee

Management

Fixed Fee

2

NUMBER OF STRATEGIES OFFERED

Investment Committee

2 6

Data as on 31st Dec 2019

LONG TERM

TH E M E

GROWTH To achieve long term growth by investing in companies and sectors that can reap the maximum benefits arising out of the India growth story driven by demographic dividend and increasing per capital income

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Mr. Milind Karmarkar is a Chartered Accountant and associated with the capital markets for the past 25 years. He has been the Head of Research of Dalal & Broacha’s institutional research desk and has been managing money as a Fund Manager for Dalal & Broacha’s PMS for the last 12 years.

Mr.Nawaz Sarfaraz is an engineer and MBA by qualification. He joined Dalal & Broacha from the Mutual Fund Industry. He was the Head of Research at IDBI Mutual Fund before joining us as an AFM (Asst. Fund Manager) in February 2019. He has an experience of 12 years in equities.

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

14.38%

12.12%

2.98%

7.63%

11.82%

13.73%

7.34%

8.50%

11.95%

9.35%

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Inception Date

24-Aug-07

Data as on 31st Dec 2019

Benchmark

Our classical old-school investment style of “buy and hold’’ might seem simple but is that much harder to implement with increased volatility owing to many factors--both domestic and international.

But we follow a simple bottom-up strategy of undertaking in-depth research before-hand and once we zero in on an investment decision, we prefer sticking to it--may even add to our position--and riding out the volatility, so as to get the maximum benefit out of our investment calls.

Nifty

50

Total number of

Stocks

Average Marketcap

78,500Cr.

INR

20 25 -

PMS & AIF SPECIAL EDITION JAN 2020 | 35

PMS

INVESTMENT TEAM

Green Portfolio Private Limited.

INR

56.04

Crores

Total AUM

Investors

Green Portfolio PMS is founded by CAs and Premium MBA degree holders having 3 generations of successful investing and wealth generation experience. We believe in disciplined long term investing as a requisite for wealth creation. Our team has expertise in identifying value investments through detailed fundamental study and buying the right stocks at right price and in stagerred manner.

18 1

NUMBER OF STRATEGIES OFFERED

INVESTMENT PHILOSOPHY

Investments are made in select Mid and Small cap companies with good fundamentals and quality corporate governance and have the potential to generate sustainable return over medium to long term.

Fee Structure Fixed Fee

Variable fee or

AMC 1.50%

8%

1 Year

2 Year

3 Year

NIL

NIL

NIL

Research

Exit Load

SEBI Regn. No.INP000006022

36 | PMS & AIF SPECIAL EDITION JAN 2020

nd

5

rd

Fund

st

Management

NA

Hurdle

2

Profit Sharing 20% Profit sharing above 8% Hurdle

Investment Committee

AMC

2 Data as on 31st Dec 2019

THEME

GREEN PORTFOLIO SPECIAL This Strategy invests in businesses with growth potential to become multi baggers over the investment period of 3-5 years. In this value strategy, the stocks are selected based on corporate governance, business growth potential, business moats (product/service), corporate initiatives for business growth (R&D, Marketing, product development etc), and strength of company’s financials to be able to show growth.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER CA Anuj Jain is a third generation investor and third generation CA with his family being generated over Rs. 1000 crores from stock market investing over the last 4 decades. Having served as a practicing CA professional, Anuj has gained in-depth understanding of financial reporting by companies. Anuj has over 15 years of investing experience having identified many multi-bagger investment ideas.

Mr. Anuj Jain

1 year

Performance

Strategy

Benchmark

9.47%

14.38%

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

NA

NA

NA

NA

NA

NA

21.50%

12.87%

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Inception Date

12-Jul-18

Data as on 31st Dec 2019

Benchmark

BSE

SENSEX

Average Marketcap

11927Cr.

INR

The investments under this scheme have inherent business strength, growth potential, corporate governance, valuation comfort and margin of safety. The investments are diversified among 15 stocks and in a stagerred manner.

This scheme parks money considering market conditions and the idle cash is parked in liquid funds. We have over 60 stocks under coverage of this scheme.

Total number of

15

Stocks

PMS & AIF SPECIAL EDITION JAN 2020 | 37

PMS

IDFC

AMC LIMITED

77.08

IDFC Asset Management Company is one of India’s

Top 10 Asset Managers with over 1 million investor folios representing leading institutions, body corporates, familyoffices and individual clients. IDFC AMC manages a range of funds across debt, equity and liquid alternatives asset classes and has a distribution reach that covers 40 plus cities directly and has an indirect presence in over 280 plus towns across India.

Investors

INR

182

IDFC Neo Equity Portfolio follows an Artificial Intelligence (AI) – Machine Learning (ML) based investment process. The portfolio is agnostic to any one specific theme or investment style. Machine learning is a field of computing wherein the algorithms have the ability to learn from data and make predictions.

INVESTMENT PHILOSOPHY

Fee Structure Fixed Fee AMC

Variable fee or

AMC

Hurdle

NA

NA

1st Year

2nd Year

3rd Year

3%

2%

1%

2.50% Exit Load

INVESTMENT TEAM Fund Management SEBI Regn. No.INP000002064 SEBI Regn. Date: April 2019

38 | PMS & AIF SPECIAL EDITION JAN 2020

Crores

Total AUM

Profit Sharing

1

NA

1 3 Investment Committee

NUMBER OF STRATEGIES OFFERED

Research

2

Data as on 31st Dec 2019

IDFC NEO

THEME

EQUITY PORTFOLIO FUND IDFC AMC introduced a pioneering and unique PMS powered by AI (Artificial Intelligence) in 2017, bringing AI techniques in equity fund management to Indian investors. The PMS product is a focused portfolio of large and mid-capitalized stocks from the S&P BSE 200 index stock universe combining Machine Learning based investment process with Portfolio Manager Expertise.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Dr. Chetan Mehra joined IDFC AMC in March 2019. He is a Quantitative Portfolio Manager and Data Scientist with about two decades of experience in quantitative analysis and in building trading models for global markets. In his earlier avatar, Dr. Mehra co-managed a global macro hedge fund which traded global bonds, equities, FX and commodities using futures and options. He specialises in machine learning and extracting information out of data for prediction.

Dr. Mehra holds a Ph.D in Computer Science (specializing in multi-agent systems for financial markets) from the University of Southampton. Chetan is also an MBA from university of Leeds, London.

Dr. Chetan Mehra

Absolute (%)

Performance

CAGR (%)

Absolute (%)

1M

3M

6M

1Y

2Y

3Y

5Y

CY19

CY18

CY17

IDFC Neo Equity Portfolio (model portfolio)

2.14%

5.22%

9.20%

5.09%

0.25%

NA

NA

5.09%

-4.36%

12.21%

IDFC Neo Equity Portfolio (pool level)

2.15%

5.15%

8.99%

4.95%

0.79%

NA

NA

4.95%

-3.21%

11.65%

As on 31st Dec 2019

KEY STRENGTH OF THE STRATEGY

Inception Date

11-Jul-17

Data as on 31st Dec 2019

Benchmark

IDFC Neo Equity Portfolio driven by Machine Learning (ML) capabilities, under the supervision of a Data Scientist, has the potential to identify opportunities to generate additional alpha while minimising risk / volatility of returns. Neo’s Algorithms are able to identify exposures that the market rewards in a stable and consistent fashion. The algorithm combs through large quantities data to identify pockets of investment opportunity.

S&P BSE 200

Index

Average Marketcap

270,070 Cr.

INR

Total number of

Stocks

34 PMS & AIF SPECIAL EDITION JAN 2020 | 39

INVESTMENT TEAM

PMS

Total AUM

127 186

INR

PRIVATE LIMITED

Investors

MARATHON TRENDS ADVISORY

Crores

Marathon Trends Advisory Private Limited is a SEBI approved Portfolio Management

Service (PMS) led by Atul Suri, who has over 25 years of experience in the Indian equity markets. Our lead PMS product MEGA TRENDS has been developed as a result of over two decades of trading, investing and applying that learning to deliver a unique combination of Fundamental analysis with an overlay of Quantitative analysis. This hybrid strategy is called “QUANTAMENTALS”, which is widely used in developed markets.

INVESTMENT PHILOSOPHY • Our investment philosophy is “Long term Trend Investing”, where our objective is to identify good quality growth stocks with trending earnings. We optimize entry and exit by using a quantitative model.

• Risk management is guided by the principle of “Cut your losses quickly and let your profits run”.

Fee Structure Fixed Fee

Variable fee

AMC

or

AMC

Hurdle

2.00%

12%

1 Year

2 Year

3rd Year

3%

0%

0%

NA st

Exit Load

SEBI Regn. No. INP000005722

40 | PMS & AIF SPECIAL EDITION JAN 2020

nd

Profit Sharing 20% Profit sharing above 12% Hurdle

Invesment Team Fund Management

2

NUMBER OF STRATEGIES OFFERED

Research

1

3

Data as on 31st Dec 2019

MEGA

TRENDS

TH E M E

• Our theme is “Cut your losses, ride your profits”.

• We use Fundamental Analysis to identify good quality, growth oriented stocks. We combine this with quantitative analysis to optimize Entry and Exit points.

• Focused investments are done in stocks witnessing growth in earnings and prices (Megatrends).

MULTI CAP

• As the Megatrend plays out, we invest and wait patiently. When the trend in earnings and prices ends, we have no emotional attachment in exiting those stocks completely and moving on to find the next Megatrend.

• The objective of our fund is to create wealth, by consistently compounding and more importantly by keeping drawdowns low.

PROFILE OF PORTFOLIO MANAGER • Atul Suri has over 27 years of experience investing in equities.

• He started his career as a Fundamental Analyst in 1990 with PPFAS. • In 1994 he secured a Masters in Banking and Finance from UTS Australia.

• From 1995 to 2003 he worked with Birla Sunlife securities heading the PCG. • In 2008 he got associated with Mr Rakesh Jhunjunwala in an advisory capacity and managed an Independent Book.

• From 2017 he has been managing his own PMS.

Mr. Atul Suri

1 year

Performance Standard Deviation

Strategy

2 years

Benchmark

Strategy

3 years

Benchmark

Strategy

Benchmark

5 years Strategy

Since Inception

Benchmark

Strategy

Benchmark

17.45%

7.66%

5.69%

1.99%

NA

NA

NA

NA

6.58%

3.55%

0.76%

0.70%

0.72%

0.70%

NA

NA

NA

NA

0.7%

0.68%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

0.58

-0.04

NA

NA

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Average Marketcap

• Use of Quantamentals (combination of fundamentals and

Inception Date

1-Nov-17

Data as on 31st Dec 2019

Benchmark

quantitative analysis) as a style of managing the portfolio is what sets us apart, from most other money managers in India.

• We do not look at returns in isolation, but look at risk adjusted returns. We attempt to have a consistent compounding portfolio with low drawdowns.

• We aim to compound the portfolio consistently over long periods of time, which results in massive wealth creation in the long term.

Nifty

500

187542

INR

Total number of

Stocks

Cr.

20

PMS & AIF SPECIAL EDITION JAN 2020 | 41

NARNOLIA

FINANCIAL ADVISORS LIMITED Mr. Shailendra Kumar is the Chief Investment Officer at Narnolia having over 24 years of experience in research and fund management.

Under his leadership, Narnolia has developed wide spectrum of category leading onshore and offshore investment products ranging from both capital protection to growth oriented funds. Under Mr. Kumar, Narnolia Financial has received numerous awards including ‘Most Consistent Portfolio Manager’.

Mr Kumar holds post-graduate degrees from IIT, Delhi. Ms Vineeta Sharma is the Head of Research at Narnolia Financial Advisors Limited. Vineeta has been in Equity research and investment industry for more than 13 Years. Over the years she has evolved her distinct style of growth stock investing which includes a proprietary process of fundamental analysis based on detailed financial modeling and bottom up analysis of the company’s financial and operating environment. She is a qualified Chartered Accountant and holds Bachelor of Commerce (Hons.) degree from Delhi University, India.

189 265 1

INR

NUMBER OF STRATEGIES OFFERED

Investors

Crores

Total AUM

INVESTMENT PHILOSOPHY

India 3T follows a proprietary comprehensive Fundamental bottom up research model involving information mining, financial modeling, deductive reasoning based investment thesis and active & rigorous tracking for changes in earnings & quality outlook to frame a portfolio that emphasizes on all three aspects of selection, allocation and combination of portfolio management. The strategy strives for active alpha generation through investing in companies with rising relative growth and valuation.

Fee Structure Fixed Fee

Variable fee or

AMC NIL

10%

1 Year

2 Year

3 Year

2%

0%

0%

2%

1%

0%

Exit Load (Fixed) Exit Load (Variable)

SEBI Regn. No.INP000006420

42 | PMS & AIF SPECIAL EDITION JAN 2020

nd

Research

st

33

Profit Sharing

rd

12.5% Profit sharing above 10% Hurdle

Fund

2.5%

Hurdle

Management

AMC

7

Investment Committee

3

Data as on 31st Dec 2019

INVESTMENT TEAM

PMS

THEME

INDIA 3T The key objective of the India 3T Strategy is to outperform S&P BSE 500 (the strategy’s benchmark) while tracking it on a sustainable risk adjusted basis. This is done by managing the beta of the portfolio to S&P BSE 500 while adding alpha opportunistically based on a rigorous bottom up proprietary model. The portfolio construction is optimized to hit singles and doubles as opposed to fours and sixes. This makes it very resilient especially in bearish and sideways markets by minimizing the negative effects of de-leveraging in such environments.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Mr. Shailendra Kumar manages India 3T Multi Cap portfolio. He has over 25 years of experience in research & fund management. Under his leadership, Narnolia has developed wide spectrum of category leading onshore & offshore investment products ranging from capital protection to growth oriented funds with an Assets under custody, management & advisory being over $1.5 billion. He is the editor of India Quant Analytics, a publication on quantitative statistics & structure of Indian equity market.

He has also developed 69 Indices including India’s most comprehensive “EW All Share Index” & the very first “EW Islamic Index”.

Mr Shailendra Kumar

1 year

Performance

Strategy

Standard Deviation

2 years

Benchmark

Strategy

3 years

5 years

Since Inception

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

7.9%

19.5%

11.6%

13.69% 15.50%

13.91%

6.6%

7.8%

0.9%

2.2%

11.5%

12.4%

13.2%

13.59%

13.61%

14.21%

13.42%

13.16%

12.28%

15.05%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.05

-0.36

0.42

0.48

0.87

As on 31st Dec 2019 - Risk free return = 6%

Inception Date

27-Mar-12

Data as on 31st Dec 2019

Benchmark

We have created the best data-driven buy-side research team in the country, with capabilities spread across asset classes and investment strategies.Not only do we focus on returns, we also focus on the quality of returns.

BSE

500

Average Marketcap

129665 Cr.

INR

KEY STRENGTH OF THE STRATEGY

Total number of

22

Stocks

PMS & AIF SPECIAL EDITION JAN 2020 | 43

NINE

RIVERS CAPITAL HOLDINGS PVT. LTD.

INR Investors

strong private equity legacy, Nine Rivers Capital distinguishes itself as an asset management firm that exclusively focusses on small and mid-cap public equities. We believe that generating superior risk adjusted long term returns from small/mid-cap companies require application of the same rigor and discipline as in private equity investing, something that is amply demonstrated in our exemplary track record. We have emerged as preferred institutional platform for Indian HNIs & Family Offices for their small cap allocations and are poised to rapidly grow by expanding our geographical reach to overseas investors as well.

PHILOSOPHY

Fee Structure Fixed Fee

Variable fee or

NA Exit Load

AMC

Hurdle

2.00%

10%

1 Year

2 Year

3 Year

3%

2%

1%

st

nd

rd

Profit Sharing 20% Profit sharing above 10% Hurdle

INVESTMENT TEAM SEBI Regn. No.INP000004169

44 | PMS & AIF SPECIAL EDITION JAN 2020

263

Our investment philosophy revolves around exploiting the judgmental biases and other behavioural weaknesses of market participants at large to unravel attractive investment opportunities from time to time. This includes the tendency of the larger market participants to extrapolate the past too far into the future

INVESTMENT

AMC

155

Total AUM

Nine Rivers Capital Holdings Private Limited. On the back of

Crores

INVESTMENT TEAM

PMS

Fund Management

2

NUMBER OF STRATEGIES OFFERED

1

Research

5

Data as on 31st Dec 2019

THEME

AURUM SMALL CAP OPPORTUNITIES ‘Aurum Small Cap Opportunities’ our flagship PMS plan is focussed on investing in companies with market capitalization upto INR 3500 Crs. The investment strategy is a blend of top down thesis building and bottoms up stock selection seeking to invest in businesses exhibiting long term structural growth.

Robust balance sheets with low debt, free cash flows and credible return ratios is what we seek.

We have a 360 degree approach to research comprising meeting managements, facility visits, management ref checks, etc, leading to buidling high conviction in our investment ideas.

SMALL CAP

PROFILE OF PORTFOLIO MANAGERS Mr. Sandeep Daga - 25+ years of experience in private and public market investing. Have held senior positions at Frontline Ventures and ICICI Ventures prior to founding Nine Rivers Capital in 2008.

Mr. Vivek Ganguly - 23+ years of experience across private and public market investing. Previously held senior positions in Global Environment Fund and Quantum Asset Management.

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

-14.60%

-9.50%

-19.70%

-19.90%

-2.50%

0.30%

5.00%

2.00%

24.30%

6.70%

Standard Deviation 19.84%

22.80%

22.60%

22.53%

30.41%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

-0.61

-1.02

-0.02

0.04

0.41

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

21-Dec-12

Data as on 31st Dec 2019

Benchmark

Our flaghsip PMS plan, Aurum Small Cap Opportunities has delivered robust net returns of 24.3% CAGR since inception. We have had several multibaggers in our portfolio that has enabled us to deliver superior returns.

Our average investment holding period is over 3 years.

Nifty

Small Cap

100

Average Marketcap

INR

Total number of

2,100 Cr.

12-15

Stocks

PMS & AIF SPECIAL EDITION JAN 2020 | 45

INVESTMENT TEAM

PMS

Total AUM

INR

PELICAN HOLDINGS

Crores

19

Investors

PRIVATE LIMITED

53

Pelican Holdings Pvt Ltd. (PHPL) was established in the year 2003 as part

Investment Team Strength

of the multi-faceted Pelican Group which has interests across Capital markets and Corporate advisory. For nearly two decades the Pelican Group and its Partners have served as successful advisors to clients investing across various asset classes. Pelican prides itself in its relationship based approach and has served the needs of both Corporate and Ultra High Networth Individuals alike. Our history and clientele are testimony to the quality of our service and performance. Pelican PMS is the latest addition to the services offered by PHPL

3

INVESTMENT PHILOSOPHY Pelican PMS Portfolio Management strategy is developed based on the strong understanding of trends and solid backing of temperament. The robust process aims to reduce the component of subjectivity and minimizes the conventional errors committed by investors, while at the same time offering significantly higher risk adjusted returns.

Fee Structure Variable fee AMC

Hurdle

1.50%

10%

1 Year

2 Year

3rd Year

0%

0%

0%

2.50% st

Exit Load

SEBI Regn. No. INP000006891

46 | PMS & AIF SPECIAL EDITION JAN 2020

nd

Profit Sharing 15% Profit sharing above 10% Hurdle

1

Fund

or

Management

AMC

Research

Fixed Fee

1

NUMBER OF STRATEGIES OFFERED

1

Investment Committee

3

Data as on 31st Dec 2019

PELICAN

TH E M E

PE FUND Pelican PMS works on the premise that in order to create wealth on a sustainable basis, an investment product has to be Simple, Objective, Scalable and Non-Prognosticative. In the case of Pelican’s investment strategy, the timing of entry-exit decisions will be based on the Equity Life Cycle (ELC). The ELC is mapped using the PE of the Nifty over a period, hence there is significant amount of objectivity in terms of decision making. The strategy would invest in a concentrated portfolio belonging to the large cap space with significant comparative advantages along with couple of ETFs (Nifty ETF, Midcap ETF). This reduces the downside risk that may occur due to wrong stock selection.

LARGE CAP

PROFILE OF PORTFOLIO MANAGER Deepak is the Portfolio Manager of Pelican PMS. He is a seasoned investment professional with over 16 years experience across Equity research and Fund Management. His earlier assignments include managing mutual funds, private and corporate portfolios in India and abroad.

Mr. Deepak Radhakrishnan

1 year

Performance Standard Deviation

Strategy

Benchmark

4.33% 0.40%

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

12.02%

NA

NA

NA

NA

NA

NA

4.49%

7.71%

13.84%

NA

NA

NA

NA

NA

NA

0.56%

14.29%

As on 31st Dec 2019 - % based on daily NAV

Average Marketcap

KEY STRENGTH OF THE STRATEGY

Inception Date

13-Jun-18

Data as on 31st Dec 2019

Benchmark

Avoiding the risk of research failure, timing the market accurately and optimizing cash allocation will drive the alpha on the upside while providing the adequate protection on the downside.

Nifty

50

INR

285000Cr. Total number of

Stocks

10

PMS & AIF SPECIAL EDITION JAN 2020 | 47

PMS

PGIM India Asset Management Pvt Ltd.

PGIM India Asset Management Private Limited is a SEBI registered Portfolio Manager, located at Mumbai. Our sponsor, PGIM has been built on a 140 year legacy with experience across the entire range of Asset Management services.

239 406 2

INR

NUMBER OF STRATEGIES OFFERED

Investors

Crores

Total AUM

INVESTMENT PHILOSOPHY

Offering strategies with a focus on Long Term Growth and Value Generation

Fee Structure Fixed Fee

Variable fee

AMC

or

2.50%

Hurdle

NA

NA

2nd Year

3rd Year

Profit Sharing

NA

3% for 18 months then NIL

6 2 Fund

Management

Research

Exit Load

1st Year

AMC

SEBI Regn. No.INP000006952

48 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

THEME

PGIM INDIA CORE EQUITY STRATEGY Investment Objective of the Core Equity Strategy is to generate returns by investing in a portfolio of value stocks which have the potential of wealth creation over the long term. This portfolio includes companies that have been ignored by the market, are unpopular or going through temporary difficulty. Atleast 75% of this portfolio includes companies with a minimum sales revenue of Rs. 400 Crores, 20% or higher ROCE, consistency in ability to generate free cash flow and a minimum 15 Years track record.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER In his career spanning 10 years, Himanshu has extensive experience in Equity Markets. He is a Bachelor of Technology from NIT Hamirpur and has done his PGDM from IIM Kozhikode. His previous stints have been with Max-New York Life Insurance and M3 Investments. He has been a part of the Investment team at PGIM India since 2015.

Mr. Himanshu Upadhyay

1 year

Performance

Strategy

Standard Deviation

2 years

3 years

5 years

Since Inception

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

0.01%

12.02%

-1.59%

7.50%

6.50%

14.14%

7.12%

8.00%

17.45%

11.91%

10.67%

10.84%

12.19%

13.19%

11.04%

12.24%

12.62%

13.40%

13.77%

13.52%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

-0.03

-0.11

0.55

0.56

1.05

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

08-Jul-13

Data as on 31st Dec 2019

Benchmark

Nifty CNX

100 500

Average Marketcap

49,575 Cr.

INR

Low Overlap with competing strategies. This portfolio includes companies that have been ignored by the market, are unpopular or going through temporary difficulty. Atleast 75% of this portfolio includes companies with a minimum sales revenue of Rs. 400 Crores, 20% or higher ROCE, consistency in ability to generate free cash flow and a minimum 15 Years track record.

Total number of

Stocks

21

PMS & AIF SPECIAL EDITION JAN 2020 | 49

THEME

PGIM INDIA PHOENIX STRATEGY The objective of the strategy is to generate capital appreciation over the long term by investing in a portfolio of equity of Indian companies by investing in companies going through structural changes or a turnaround situation. Atleast 75% of this portfolio includes companies with a minimum RoE of atleast 8% in the last 10 years and positive operating cash flows in atleast 6 out of the last 10 years.

MID & SMALL CAP

PROFILE OF PORTFOLIO MANAGER Mr. Himanshu Upadhyay - In his career spanning 10 years, Himanshu has extensive experience

in Equity Markets. He is a Bachelor of Technology from NIT Hamirpur and has done his PGDM from IIM Kozhikode. His previous stints have been with Max-New York Life Insurance and M3 Investments. He has been a part of the Investment team at PGIM India since 2015.

1 year

Performance Standard Deviation

2 years

3 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

-10.78%

-4.32%

-11.58%

-10.05%

2.91%

6.02%

2.97%

4.38%

10.80%

14.34%

14.42%

19.21%

13.69%

17.62%

13.69%

17.62%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

Since Inception

-1.56%

-0.60%

0.30%

0.30%

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

01-Aug-16

50 | PMS & AIF SPECIAL EDITION JAN 2020

Benchmark

CNX MID Cap

100

Average Marketcap

10417Cr.

INR

Low Overlap with competing strategies and offers a lower PE compared to the benchmark. Atleast 75% of this portfolio includes companies with a minimum RoE of atleast 8% in the last 10 years and positive operating cash flows in atleast 6 out of the last 10 years.

Total number of

Stocks

23

Data as on 31st Dec 2019

PHILLIP CAPITAL INDIA PVT. LTD.

INR

Investors

Established in 1975, the PhillipCapital group of companies is one of the leading financial institutions in the world with a global reach spanning 16 countries.

We have over 1 million clients worldwide, Assets Under Custody/ Management worldwide of USD 29 billion and shareholder’s funds in excess of USD 1 billion. PhillipCapital (India) Pvt. Ltd. is a part of the ‘PhillipCapital Group’ Singapore. PhillipCapital (India) Pvt. Ltd. is committed to provide quality advice and investment options based on cutting edge research to HNI, Institutional and Retail investors.

81

Total AUM

Phillip Capital India Pvt Ltd.

121

No churning or speculation activity. Clear research driven long term approach.

Customised portfolios and staggered investments approach. Close tracking of the performance with the ability to balance large and midcaps if and when required. Well defined “Clear No Go Areas” in investments. We strategically avoid companies with huge debt, dubious management track record and have market capitalization below INR 500 Cr

INVESTMENT PHILOSOPHY

Fee Structure Fixed Fee or

AMC

2.50%

Hurdle

1.50%

10%

1 Year

2 Year

3 Year

2%

0%

0%

st

Exit Load

NUMBER OF STRATEGIES OFFERED

Variable fee

AMC

nd

rd

INVESTMENT TEAM Fund Management SEBI Regn. No.INP000004433 Data as on 31st Dec 2019

Crores

INVESTMENT TEAM

PMS

Profit Sharing 15% Profit Sharing above 10% Hurdle

2

Investment Committee

3

5

Research

3

PMS & AIF SPECIAL EDITION JAN 2020 | 51

THEME

PHILLIP SIGNATURE INDIA PORTFOLIO The portfolio aims to generate superior returns over medium to long term by investing in cherry picked stocks across Large, Mid and Small capitalization companies. The emphasis is to invest in a diversified portfolio of companies having good corporate governance, sustainable growth prospects, in emerging sectors and in turnaround stories. It is a multi cap strategy with a focused portfolio of about 20 carefully chosen names with an investment horizon of 3-5 years.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER A triple graduate with specialization in finance and management. More than 14 years of experience in Indian equity markets and investment products. Having worked at both buy and sell side he exactly understands how each of them works and how to stay ahead of the street.

Mr. Nishit Shah

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

17.25%

5.12%

3.35%

-0.93%

14.26%

8.16%

NA

NA

13.52%

7.28%

Standard Deviation 15.10%

16.70%

15.60%

16.85%

14.40%

15.52%

NA

NA

14.60%

15.84%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.75

-0.16

0.60

NA

0.61

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

18-May-16

52 | PMS & AIF SPECIAL EDITION JAN 2020

Total number of

15-22

Stocks

Benchmark

Our philosophy of sticking to quality names and investing in a staggered manner has helped us to tide over last few years of extreme volatility. Our philosophy is based on holding on to our winners as long as possible and selling off our losers as soon as possible. This philosophy has helped us become one of the best performing PMS providers.

Nifty LargeMid

250 Data as on 31st Dec 2019

THEME

PHILLIP EMERGING INDIA PORTFOLIO The portfolio aims to generate superior returns over medium to long term by investing in cherry picked stocks across Large, Mid and Small capitalization companies. The emphasis is to invest in a diversified portfolio of companies having good corporate governance, sustainable growth prospects, in emerging sectors and in turnaround stories, strategy with a focused portfolio of about 20 carefully chosen names with an investment horizon of 3-5 years.

MID & SMALL CAP

PROFILE OF PORTFOLIO MANAGER Mr. Nishit Shah - A triple graduate with specialization in finance and management. More than 14 years of experience in Indian equity markets and investment products. Having worked at both buy and sell side he exactly understands how each of them works and how to stay ahead of the street.

1 year

Performance

Strategy

Benchmark

2 years

3 years

5 years

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Since Inception Strategy

Benchmark

15.78%

-4.51%

1.82%

-12.46%

NA

NA

NA

NA

5.27%

-3.84%

Standard Deviation 15.76%

18.37%

17.70%

19.32%

NA

NA

NA

NA

16.91%

18.91%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.62

-0.23

NA

NA

0.02

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

Total number of

15-22

Stocks

Benchmark

Our philosophy of sticking to quality names and investing in a staggered manner has helped us to tide over last few years of extreme volatility. Our philosophy is based on holding on to our winners as long as possible and selling off our losers as soon as possible. This philosophy has helped us become one of the best performing PMS providers.

S&P BSE Midcap

9-Aug-17

Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 53

PMS

PRABHUDAS LILLADHER PRIVATE LIMITED Core Team

147.68

MR. AJAY BODKE

DIRECTOR

CEO & CHIEF PORTFOLIO MANAGER

INR

Crores

Investors

Mr. DILIP BHATT

Total AUM

286

MR. NUPUR PATEL HEAD SALES & MARKETING

Prabhudas Lilladher Private Limited is a seven-decade old, leading financial services firm, Awarded ASIA’S Most Admired Brand 201718. The firm was started in 1944 by Mr. Prabhudas Lilladher Sheth.

INVESTMENT PHILOSOPHY Emphasis on a rigorous, disciplined-approach to Stock selection based on in-house BVM matrix (Business, Valuation, Market Interest factors), leveraging on strong Institutional research team of the Group, consistent monitoring and review at regular intervals.

Fee Structure Fixed Fee

Variable fee

AMC

or

AMC

Hurdle

1.50%

12%

1 Year

2 Year

3rd Year

3%

2%

1%

2.50% st

Exit Load

SEBI Regn. No. INP000001231

nd

Profit Sharing 20% Profit sharing above 12% Hurdle

Invesment Team Fund Management

54 | PMS & AIF SPECIAL EDITION JAN 2020

1

NUMBER OF STRATEGIES OFFERED

Investment Committee

3

3 1 Research

Data as on 31st Dec 2019

MULTI

TH E M E

STRATEGY This strategy endeavours to generate steady returns in varying market conditions by following a disciplined, process-driven approach with reliance on rigorous fundamental research, judicious capital allocation across & within sectors, strict adherence to various risks like concentration risks, liquidity risks etc and vigilant monitoring. Our aim is to outperform the broader market in the long run. The portfolio provides capital appreciation by investing primarily in equity instruments. It strives to reflect the market sentiment. With large caps around 60-70% and mid/small caps around 30-40%, multi strategy is ideal for investors with a long-term horizon who want steady returns under varying market conditions without compromising on the high growth potential of the indian economy. The focus of the strategy is on emerging themes with a combination of top-down and bottom-up approach in portfolio construction.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER

Mr. Ajay Bodke

Ajay has over 24 years of experience as a Senior Portfolio Manager with India’s leading Mutual Funds like IDFC MF, Standard Chartered MF & SBI MF. He has done Masters in Financial Management & Masters in Business Administration from the Macquarie Graduate School of Business (Sydney) and Mechanical Engineering from the Government College of Engineering (Pune). Ajay’s responsibility involves spearheading Investment Management for all portfolio strategies by monitoring company selection & exposures, sectoral allocation, risk mitigation, actively participating in client interactions/ presentations & building the PMS business. He was ranked among India’s Top 10 Fund Managers by one of India’s leading financial newspapers in its first ever ratings of Fund Managers and was part of the Mutual Fund team recognized as ‘India’s Best Money Makers’ by a leading capital markets magazine.

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

9.24

7.84

-5.70%

0.70%

17.86%

19.36%

13.07%

9.84%

22.44%

18.71%

Standard Deviation

12.34

12.79

12.12

14.14

13.86

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Inception Date

20-Aug-13

Data as on 31st Dec 2019

Benchmark

• Multicap strategy stands out amongst the investment options due to its flexibility of investment between large & mid cap companies. They can take the advantage of growth and the value style of investment.

• Large cap stocks provide stability to portfolio and mid cap stocks provide growth potential.

• This category of fund suits those with a low risk profile.

Nifty

500

Total number of

Stocks

Average Marketcap

INR

302789 Cr.

15 18 -

PMS & AIF SPECIAL EDITION JAN 2020 | 55

EQUIGROW

TH E M E

STRATEGY This strategy aims at investing and holding largely high growth stocks without any sector bias in securities across large, mid & small cap categories with an aim to generate superior returns over the long term. With mid cap allocation slightly higher as compared to large caps, this strategy is positioned for investors with moderate risk profile. Equigrow strategy is ideal for investors with a mid to long-term horizon who want steady returns under varying market conditions without compromising on the high growth potential of the indian economy.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Ajay has over 24 years of experience as a Senior Portfolio Manager with India’s leading Mutual Funds like IDFC MF, Standard Chartered MF & SBI MF. He has done Masters in Financial Management & Masters in Business Administration from the Macquarie Graduate School of Business (Sydney) and Mechanical Engineering from the Government College of Engineering (Pune). Ajay’s responsibility involves spearheading Investment Management for all portfolio strategies by monitoring company selection & exposures, sectoral allocation, risk mitigation, actively participating in client interactions/ presentations & building the PMS business. He was ranked among India’s Top 10 Fund Managers by one of India’s leading financial newspapers in its first ever ratings of Fund Managers and was part of the Mutual Fund team recognized as ‘India’s Best Money Makers’ by a leading capital markets magazine.

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

11.74

7.35

-0.83

2.28

12.81

12.32

11.41

7.78

20.06

14.84

Standard Deviation

12.43

12.58

12.02

14.26

13.85

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Inception Date

20-Aug-13

56 | PMS & AIF SPECIAL EDITION JAN 2020

Benchmark

• Equigrow is a diversified strategy which invests in stocks across market capitalization, Portfolio comprises of a mix of large cap, midcap and small cap stocks. This strategy suits those with a moderate risk profile • Benefit of large cap becoming bigger and midcap growing to become large cap. Identifying the best companies to invest irrespective of the sector • Having reasonably diversified portfolios without being over diversified

Nifty

500

Total number of

Stocks

Average Marketcap

INR

297150 Cr.

15 18 -

Data as on 31st Dec 2019

FORTUNE

TH E M E

STRATEGY Emphasis on long term opportunities for wealth creation. Capital allocation across various businesses in this strategy ranges across sectors with strong brand franchises. This strategy is looking to buy businesses growth phase or those on the cusp of a strong turnaround due to favourable business environment. Managements that adhere to high standards of corporate governance, businesses with strong growth opportunities and clean balance sheets are some of the other traits we look at before picking a stock.

SMALL CAP

PROFILE OF PORTFOLIO MANAGER Ajay has over 24 years of experience as a Senior Portfolio Manager with India’s leading Mutual Funds like IDFC MF, Standard Chartered MF & SBI MF. He has done Masters in Financial Management & Masters in Business Administration from the Macquarie Graduate School of Business (Sydney) and Mechanical Engineering from the Government College of Engineering (Pune). Ajay’s responsibility involves spearheading Investment Management for all portfolio strategies by monitoring company selection & exposures, sectoral allocation, risk mitigation, actively participating in client interactions/ presentations & building the PMS business. He was ranked among India’s Top 10 Fund Managers by one of India’s leading financial newspapers in its first ever ratings of Fund Managers and was part of the Mutual Fund team recognized as ‘India’s Best Money Makers’ by a leading capital markets magazine.

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

-7.38

-7.32

-16.85

-15.83

NA

NA

NA

NA

-6.79

-6.11

Standard Deviation

13.24

13.41

NA

NA

12.63

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Inception Date

20-Jun-17

Data as on 31st Dec 2019

Benchmark

Mid & Small cap funds offer more growth opportunities than large cap funds.

Emphasis on mean reversion & value style. High impetus on companies with quality business models & management. Allocation to companies which exhibit operating & financial leverage. Bottom up stock picking approach without bias towards market cap or sector.

BSE SmallCap

Total number of

Stocks

Average Marketcap

INR

4354 Cr.

15 18 -

PMS & AIF SPECIAL EDITION JAN 2020 | 57

PMS

Right Horizons

Portfolio Management Services Ltd. Right Horizons PMS (RH PMS) is headed by its Founder - Director & CIO, Mr. Anil Rego. He is the Fund Manager of RH Flexi Cap, RH India Business Leader, RH Super Value and RH AlphaBots India Prime Portfolio. He follows the contrarian investing style and is a seasoned Investor for over 2 decades. Prior to founding Right Horizons, he worked for Wipro across Business Planning and Mergers & Acquisitions profile. He is an MBA and CFA (ICFAI) degree holder. He is regularly quoted in leading print and television media. He is supported by a professional team of Fund Managers and Research Analysts. The team thoroughly imbibes the proprietary valuation models and research criteria.

PROFILE OF PORTFOLIO MANAGER Mr. Anil Rego is the Fund Manager of RH Flexi Cap, RH India Business Leader, RH Super Value and RH AlphaBots India Prime Portfolio. He follows the contrarian investing style and is a seasoned Investor for over 2 decades.

Prior to founding Right Horizons, he worked for Wipro across Business Planning and Mergers & Acquisitions profile. He is an MBA and CFA (ICFAI) degree holder. He is regularly quoted in leading print and television media.

Mr. Anil Rego

Total AUM

320 599 5 Investors

Crores

INR

NUMBER OF STRATEGIES OFFERED

INVESTMENT PHILOSOPHY

We strive to deliver a superior risk adjusted return through a robust risk management methodology, using a structured investment process and an in-depth Fundamental and Quantitative Analysis framework.

Fee Structure Variable fee AMC

Hurdle

1.00%

10%

1st Year

2nd Year

3rd Year

2%

1%

0%

2.50%

Research

Exit Load

5

Fund

or

Management

AMC

5

Profit Sharing 15% Profit sharing above 10% Hurdle

Investment Committee

3

SEBI Regn. No.INP000004359

58 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

*Total AUM & Investors data as on 30 th Nov 2019

Fixed Fee

THEME

RH INDIA BUSINESS LEADERS

LARGE CAP

Large cap focussed fund, aiming to deliver superior risk adjusted return using Core Portfolio of Business Leaders and Satellite Portfolio of emerging leaders.

KEY STRENGTH OF THE STRATEGY

Average Marketcap INR

230119 Cr.

Benchmark

Benchmark aligned sectoral exposure in large cap growth companies. Portfolios seeks to generate capital appreciation over relatively “Medium to Long” term period. The idea of portfolio is to stay above benchmark at all times. Portfolio composition with typically 60% in Index names with active management of names and balance from broader index. Typical Portfolio holding would not have more than 15-25 stocks keeping Nifty as Index Benchmark

Nifty

50

Total number of

15-25

Stocks

THEME

RH FLEXI CAP PORTFOLIO

MULTI CAP

A diversified equity portfolio that endeavors to achieve long term capital appreciation and generate returns by investing across market cap

KEY STRENGTH OF THE STRATEGY

Average Marketcap INR

130936Cr.

Data as on 31st Dec 2019

Benchmark

Benchmark agnostic sectoral exposure in companies across market caps. Portfolio seeks to generate capital appreciation over relatively “Medium to Long” term period. The idea of portfolio is to stay above benchmark at all times. Portfolio composition is unconstrained with respect to the Benchmark and can move across market caps as per RH’s proprietary asset allocation model. Typical Portfolio holding would not have more than 15-25 stocks keeping Nifty as Index Benchmark

NSE

500

Total number of

15-25

Stocks

PMS & AIF SPECIAL EDITION JAN 2020 | 59

THEME

RH INDIA UNDER-SERVED SCHEME

A strategy that focusses on delivering superior risk adjusted returns by primarily target under institutionalized name without associated volatility. It aims to create a book that posses superior cash flow growth over meaningful periods.

SMALL CAP

PROFILE OF PORTFOLIO MANAGER Piyush, born and raised in India, is investment manager of Right Horizons Minerva Funds. Having spent time with Citigroup and Bombay Stock Exchange in India, he moved to United States in 2002, where he covered stocks within Business Services, Autos, Consumer Products and Financials with Sanford Bernstein, Longbow Research, and Avondale Partners. Piyush received an MBA from University of North Carolina at Chapel Hill.

Mr.Piyush Sharma

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

-9.00%

-6.87%

-7.50%

-14.98%

0.06%

4.89%

5.87%

4.63%

11.76%

5.25%

Standard Deviation 19.66%

18.30%

18.43%

19.97%

16.20%

19.46%

16.04%

19.04%

15.52%

21.48%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

-0.76

-0.73

-0.37

-0.01

0.37

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

01-Apr-11

60 | PMS & AIF SPECIAL EDITION JAN 2020

Benchmark

BSE

Small Cap

Average Marketcap INR

Strategy focusses on businesses within most underpenetrated categories, which have largest potential to come in line with G7 levels Concentrated holding typically between 12-16 stocks. In periods when smallcaps are declining, the strategy significantly outperforms and draws down much less vs. the small cap index, despite the composition of small-cap stocks in the portfolio.

6,385 Cr.

Total number of

Stocks

14 Data as on 31st Dec 2019

&

Presents

PMS

CORNER An Exclusive Monthly PMS Episode A Comprehensive Coverage on Portfolio Managers - Only on ET NOW

Best Financial Services Award 2018

12000+ Registered Investors

125+ PMS Strategies

www.pmsbazaar.com

10+ Countries Support

PMS & AIF SPECIAL EDITION JAN 2020 | 61

Sameeksha Capital Private Limited

Sameeksha Capital is registered with SEBI and offer portfolio management services to Institutional, Family Office and High Net Worth Investors for investing in India as well as abroad. Founders of some of the most respected Indian companies have invested in our flagship Equity Scheme and we have delivered good risk adjusted performance.

We focus on process driven investing and have developed proprietary analytical models and methods which we follow rigorously to identify companies with superior risk-reward characteristics. A comprehensive set of rules guide us in our investment process and arguably reduce individual biases and mistakes.

258 56

INR

NUMBER OF STRATEGIES OFFERED

Investors

Crores

Total AUM

1

INVESTMENT PHILOSOPHY

We carry out very thorough quantitative analysis of every company in which we invest and back it up with equally important qualitative analysis. We have developed proprietary tools which helps us in our process driven approach. We have ability to identify and access relatively undiscovered companies.

Fee Structure Hurdle

1%

7.3% compounded hurdle rate

1st Year

2nd Year

3rd Year

3%

2%

1%

2.50% Exit Load

SEBI Regn. No.INP000004995

62 | PMS & AIF SPECIAL EDITION JAN 2020

Profit Sharing 20% Profit Sharing above compounded Hurdle Rate subject to high water mark and no catch up

6 2 Fund

AMC

or

Research

AMC

Variable fee

Management

Fixed Fee

Data as on 31st Dec 2019

INVESTMENT TEAM

PMS

THEME

INDIA EQUITY FUND Invest in long-term growth opportunities in Indian companies across market capitalization (with greater emphasis on mid and small cap companies that are not fully discovered) that have superior business model, sufficiently large market opportunity to deliver growth, strong and shareholder focused management and are available at price that would result in sufficiently attractive risk adjusted returns over a horizon of at least two years

MULTI CAP

PROFILE OF PORTFOLIO MANAGER Mr. Bhavin Shah has twenty years of experience building top research franchises: Seven years as Managing Director and the Global head of Technology at JP Morgan, six years as Director and Head of Asia Pacific Technology at Credit Suisse and five years as founder of Equirus Securities. He holds an MBA degree with a double major in Economics and Finance with Beta Gamma Sigma honors from University of Chicago Booth School of Business.

Mr. Bhavin Shah

1 year

Performance

Strategy

Standard Deviation

2 years

Benchmark

3 years

5 years

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Since Inception Strategy

Benchmark

20.9%

-9.5%

4.3%

-19.9%

15.6%

0.3%

NA

NA

15.2%

4.3%

13.2%

18.4%

13.0%

20.2%

11.7%

19.1%

NA

NA

11.8%

19.2%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

1.1

-0.1

0.8

NA

0.8

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

01-Apr-16

Data as on 31st Dec 2019

Benchmark

NIFTY SmallCap

100

Median Marketcap

4868.9Cr.

INR

Our investment style precludes simply buying popular but high P/E stocks. We buy stocks for which we are able to justify value based on our proprietary dynamic discounted cash flow /Excess return on equity model and hence offer superior risk/ reward tradeoff. As such, we have delivered our performance without benefitting from “the Quality Bubble.�

Total number of

Stocks

15-25 PMS & AIF SPECIAL EDITION JAN 2020 | 63

PMS

SCIENT CAPITAL PVT. LTD.

Our offerings are designed to complement investor’s core portfolio. We use unorthodox research and innovative structuring to create unique investment products that deliver high returns having low correlation with listed equity and debt. We target domains that have temporarily supernormal returns due to institutional constraints, market inefficiencies or structural factors.

INVESTMENT PHILOSOPHY

Fee Structure Fixed Fee

Variable fee or

AMC

AMC

NA Exit Load

Hurdle

1.00%

8%

1 Year

2 Year

3 Year

2%

0%

0%

st

nd

rd

INVESTMENT TEAM Fund Management SEBI Regn. No. INP000005166 64 | PMS & AIF SPECIAL EDITION JAN 2020

187

Crores

INR Investors

smart research and innovative structuring to create unique investment products that deliver high returns having low correlation with listed equity and debt. We target domains that have temporarily supernormal returns due to institutional constraints, market inefficiencies or structural factors. Scient Capital is fully capitalized and backed by marquee individuals with stellar academic and professional track records. The Board of Directors includes individuals from IIT Bombay & IIM Ahmedabad. Management Team has a collective track record of over 75 years in the financial services industry across high yield debt, equity fundraising and portfolio management.

110

Total AUM

Scient Capital is a specialist alternate asset management firm. We use

Profit Sharing 20% Profit sharing above 8% Hurdle

1

Investment Committee

NUMBER OF STRATEGIES OFFERED

1

4 2 Research

Data as on 31st Dec 2019

THEME

ARIES PMS (MID YIELD DEBT PMS STRATEGY) Aries is a debt PMS strategy with the objective of earning higher risk adjusted returns by taking exposure in debt securities in India. It targets the intermediate yield space (ratings between AA and BB) using a buy-to hold approach with a 2 to 3-year horizon.

MID YIELD DEBT PMS STRATEGY

PROFILE OF PORTFOLIO MANAGER Ramesh Rachuri brings in over 14 years of experience across markets ranging from forex, equity derivatives and quant, to the entire panoply of debt sub markets ranging from g-secs to credit and structured products. Post his PGDM from IIM, Indore, he worked with Securities Trading Corporation of India Ltd, Reliance Mutual Fund and Reliance PMS, and BOI AXA Mutual Fund. He has demonstrated excellence in operationalizing new verticals while scaling them up into sustainable & profitable operations. A particular focus has been to incorporate quantitative techniques in fund management, and fund strategy to extract value from size and trading environmental changes.

Mr. Ramesh Rachuri

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

15.06%

10.45%

14.49%

8.67%

13.72%

8.04%

NA

NA

13.66%

8.04%

As on 31st Dec 2019 - % based on daily NAV

KEY STRENGTH OF THE STRATEGY

Benchmark

Aries PMS focusses investing in intermediate yield credit including papers with rating between AA and BB and other equivalent assets/securities This space covers debt assets between two extremes the relatively but low yield sovereign/AAA debt on one hand and the unrated/B rated real estate backed NCDs on the other. Target gross yield for the portfolio will be in the range of 12% to 16% and the portfolio duration will be 3 to 4 years.

Inception Date

S&P BSE India Corporate Bond Index

Total number of

Bonds

5-10

01-Sep-16

Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 65

INVESTMENT TEAM

PMS CREATING ALPHA

Total AUM

70.29 INR

Crores

171

Investors

STALLION ASSET PRIVATE LIMITED

Mr. Amit Jeswani is a Double Charter, has successfully completed his Chartered Financial Analyst (Virginia, USA) and Chartered Market Technician (New York, USA). He graduated in Business with finance from Kingston University London. He has been investing in capital markets from last 14 years.

He started at a tender age of 16 as his father was a Stock Broker and has worked with various financial giants. He is an active member with Association of Technical Market Analyst and Indian Association of Investment Professionals.

INVESTMENT PHILOSOPHY The Proposed strategy of the Stallion Asset Core Fund would be to follow a combination of Top Down and Bottom Up approach for picking stocks and sectors and construct a diversified portfolio of the top conviction ideas

Fee Structure Fixed Fee

Variable fee

AMC

or

AMC

Hurdle

1.50%

10%

1 Year

2 Year

3rd Year

2%

0%

0%

3.00% st

Exit Load

SEBI Regn. No. INP000006129

nd

Profit Sharing 15% Profit sharing above 10% Hurdle

Invesment Team Fund Management

66 | PMS & AIF SPECIAL EDITION JAN 2020

1

NUMBER OF STRATEGIES OFFERED

Research

1

4

Data as on 31st Dec 2019

STALLION ASSET

CORE FUND

CREATING ALPHA

TH E M E

There are Typically 2 Kind of Companies we Investment in 1) Companies that don’t need Capital to Grow like Asset Management & Consumer Companies (Asset Light Compounders) 2) Companies that can consistently Reinvest their capital at High ROIC & have a Strong Competitive Advantage (Reinvestment moats) We don’t invest in Cyclical Companies like Commodities or Government Companies, of course you can make money in Cyclical but our goal at stallion is not to just get rich, It’s to Get rich & stay rich.

MULTI CAP

Our Portfolios are largely concentrated towards 1) Financials 2) Consumer 3) Pharma & 4) Technology. We typically prefer B2C companies but are open to buying B2B if the company has a massive Technology edge like how Bosch did for decades in the diesel engine.

PROFILE OF PORTFOLIO MANAGER Mr Amit Jeswani is a Double Charter, has successfully completed his Chartered Financial Analyst (Virginia, USA) and Chartered Market Technician (New York, USA). He graduated in Business with finance from Kingston University London. He has been investing in capital markets from last 14 years. He started at a tender age of 16 as his father was a Stock Broker and has worked with various financial giants.

He is an active member with Association of Technical Market Analyst and Indian Association of Investment Professionals.

Mr. Amit Jeswani

1 year

2 years

Performance

Strategy

26.46%

-4.31%

Standard Deviation

12.40%

16.42%

Benchmark

Strategy

3 years

Benchmark

Strategy

NA

NA

NA

NA

5 years

Since Inception

Benchmark

Strategy

Benchmark

Strategy

Benchmark

NA

NA

NA

NA

28.92%

-1.35%

NA

NA

NA

NA

11.59%

16.42%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

1.65

NA

NA

NA

1.98

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

22-Oct-18

Data as on 31st Dec 2019

Benchmark

There are only 4 possible outcomes of any investment stratergy 1) Big Profit 2) Small Profit 3) Small Loss 4) Big Loss We believe that our strength lies in eliminating the Big Loss. If we successfully manage to do that we should be okay. In every down cycle, the B2C consumer companies will typically protect our portfolio. Our strategy of being a Multi Cap Fund will allow as to deliver returns across cycles.

CNX MIDCAP

100

Total number of

Stocks

Average Marketcap

143000 Cr.

INR

15 20 -

PMS & AIF SPECIAL EDITION JAN 2020 | 67

Tamohara Investment

PMS

Managers pvt.Ltd.

Tamohara Investment Managers Private Limited is a SEBI registered Portfolio Management company which creates and invest in benchmark and market cap agnostic equity Portfolio, focused on business (not stocks) which are most likely to create wealth for investors. The core team consists of like-minded, energetic and passionate individuals with a collective investing experinece of around 8 decades, which has successfully managed public and proprietary investment for the last 17 years and have a demonstrable track record of outperforming benchmark and delivering absolute positive return across market cycles.

Investors

427

NUMBER OF STRATEGIES OFFERED

Total AUM

11

Crores

182

INR

INVESTMENT PHILOSOPHY

We have a simple bottom-up selection philosophy, which is that outsized returns are earned over time by investing in sound businesses and attractive valuation. Philosophy has two elements – business and valuation. We seek to invest in companies which present the most powerful combination of business and valuation.

Fee Structure - TLES Hurdle 12%

Exit Load

1st Year

2nd Year

3rd Year

3%

2%

1%

Profit Sharing 20% Profit sharing above 12% Hurdle

INVESTMENT

SEBI Regn. No.INP000004763

68 | PMS & AIF SPECIAL EDITION JAN 2020

TEAM

AMC

Variable fee AMC

Hurdle

0.00%

5%

1st Year

2nd Year

3rd Year

2%

1%

0%

or

2.50% Exit Load

Profit Sharing 20% Profit sharing above 5% Hurdle

8 3 Fund

AMC 2.00%

or

2.50%

Fixed Fee

Management

AMC

Variable fee

Research

Fixed Fee

Fee Structure - TIOS

Data as on 31st Dec 2019

THEME

TAMOHARA LONG TERM EQUITY STRATEGY (TLES) Tamohara Long Term Equity Strategy (TLES) is a predominantly small and mid cap strategy, with an up to 20% tactical allocation to large cap companies in unusual circumstances. The strategy seeks to invest in up to 20 high quality businesses that are exploiting the growth potential of an emerging economy like India. The focus is on businesses that are in the initial stages of the business life cycle. This is a buy and hold strategy and has been runnig since October 2015.

SMALL & MIDCAP

PROFILE OF PORTFOLIO MANAGER Tamohara Long Term Equity Startegy(TLES) is actively managed by Mr. Sudhanshu Asthana CEO & CIO of Tamohara, He holds an M.A. in Economics and has more than 20 years of experience in fund management wherein he has handled both large and small sized funds.

His last stint was with Axis Mutual Fund as a Senior Fund Manager. Prior experiences include Barclays Wealth India, SBI Fund management and Quantum Asset management. At Tamohara, his primary responsibility is steering the business and guiding the Investment Management team.

Mr. Sudhanshu Asthana

1 year

Performance

Strategy

Standard Deviation

2 years

3 years

5 years

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

-0.26%

-6.85%

-3.03%

-15.60%

12.10%

4.38%

NA

15.42%

17.51%

19.06%

19.73%

17.77%

19.35%

NA

Since Inception Strategy

Benchmark

NA

9.88%

4.82%

NA

18.98%

19.79%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

0.16

0.02

0.82

NA

0.67

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

06-Oct-15

Data as on 31st Dec 2019

Benchmark

BSE BSE Small Mid Cap

Cap

Average Marketcap

10179 Cr.

INR

This strategy is positioned to take advantage of midsized companies exploiting the growth potential of an emerging economy like India.

The strategy is benchmark agnostic, sector agnostic, and focuses on absolute return rather than on relative return. The portfolio is constructed on a bottom’s up basis as per our research process.

As these companies are mid-sized companies with higher growth prospects, they are susceptible to both systematic and nonsystematic risks. The strategy hence is a higher risk strategy and will run a beta of more than one. Due to the nature of the strategy, as the returns can be volatile, it is encouraged that an investor comes into the strategy for at least 3 years to allow for the volatility to play out.

Total number of

Stocks

17

PMS & AIF SPECIAL EDITION JAN 2020 | 69

THEME

TAMOHARA INDIA OPPORTUNITIES STRATEGY (TIOS)

Tamohara India opportunites strategy (TIOS) is a multi-cap strategy that focuses on investment in large cap & larger midcap companies.The strategy aim to invest in 15-18 high quality business with a proven business model.TIOS strategy focus on businesses that have a well established track-record and have demonstrated leadership in their respective industries.

MIDCAP

PROFILE OF PORTFOLIO MANAGER Ms. Sheetal is a post graduate in management with a major in Finance. He also holds the Chartered Financial Analyst® designation. He has 11 years of experience in the Indian Capital Markets. Before his association with Tamohara, he was with HDFC securities, Brics Securities, and Enam securities. At Tamohara, his primary responsibility is evaluating investment opportunities and Investment Management.

Mr. Sudhanshu holds an M.A. in Economics and has more than 19 years of experience in fund management wherein he has handled both large and small sized funds. His last stint was with Axis Mutual Fund as a Senior Fund Manager. Prior experiences include Barclays Wealth India, SBI Fund management and Quantum Asset management. At Tamohara, his primary responsibility is steering the business and guiding the Investment Management team.

1 year

Performance

Strategy

Standard Deviation

2 years

3 years

5 years

Since Inception

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

13.27%

9.13%

4.63%

4.18%

14.81%

13.09%

NA

NA

14.74%

13.35%

11.14%

11.17%

13.63%

13.43%

12.56%

12.56%

NA

NA

13%

12.13%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

1.18

0.4

1.17

NA

1.16

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

18-Mar-16

70 | PMS & AIF SPECIAL EDITION JAN 2020

Benchmark

BSE

200

Total number of

Average Marketcap

154957Cr.

INR

This is a multicap strategy where the focus is on large sized companies and larger midsized companies where predictability of earnings is more. The focus is on non-cyclical business with steady compounding with established business models and demonstrated leadership in their specific industries. This product is focused on delivering low risk with higher risk adjusted returns for steady wealth creation.

Stocks

17 Data as on 31st Dec 2019

PMS

TATA PORTFOLIO

MANAGEMENT SERVICES Established in 1994, Tata Asset Management has a track record of more than 24 years in investment management. The company offers a range of investment solutions for financial planning and wealth creation and manages funds across the entire risk-return spectrum. The diversity of our fund offerings enables investors to invest as per their life stage, financial goals and risk profile. The company offers portfolio management services to high net worth individuals and advisory services to offshore investors and funds investing in India.

180

INR

INVESTMENT PHILOSOPHY

Investors

The core strength of the company stems from its intellectual capital and its robust risk management framework based on in-built controls and balances. The Tata Asset Management philosophy is centred on seeking consistent, long-term results. We aim at overall excellence, within the framework of transparent and rigorous risk controls.

Fixed Fee

NUMBER OF STRATEGIES OFFERED

Variable fee or

2.5%

AMC

Hurdle

NA

NA

Exit Load

1st Year

2nd Year

3rd Year

ACT

3.00%

2.00%

1.00%

Others

2.00%

1.00%

NIL

INVESTMENT TEAM Fund Management SEBI Regn. No. INP000001058 Data as on 31st Dec 2019

410

Growth At Reasonable Price: A Blend of Growth and Value covering the following spectrum: 1) Value with triggers 2)Earnings Upgrade Cycle 3) Thematic

Fee Structure AMC

Crores

Total AUM

Profit Sharing

2

NA

Investment Committee

5

5 2 Research

PMS & AIF SPECIAL EDITION JAN 2020 | 71

THEME

BLUECHIP A large cap oriented portfolio with a Combination of upto 30% Mid cap ideas. The objective of this Strategy is to generate moderate capital appreciation with relatively lower risk over the long term.

LARGE CAP

PROFILE OF PORTFOLIO MANAGERS Mr. Danesh Mistry: 17 years+ of experience in fund management, equity research, mortgages and investment banking including private equity and capital markets. With Tata Asset Management Ltd for more than 10 years in the investment team Mr. Surjit Singh Arora: 15 years+ of experience in equity Research and Fund Management. With Tata Asset Management Ltd. for more than 4 years in the investment team.

1 year

Performance

Strategy

2 years

3 years

5 years

Since Inception

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

14.5%

12.0%

6.8%

7.5%

15.3%

14.1%

9.5%

8.0%

9.4%

9.4%

Standard Deviation 10.51%

10.12%

NA

NA

NA

NA

NA

NA

NA

As on 31st Dec 2019 - % based on daily NAV

Average Marketcap

1 year

Sharpe Ratio

348,993 Cr.

INR

0.44

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Benchmark

Bottom Up stock picking approach, Portfolio managed in a conservative fashion and diversified across various sectors of the Indian economy.

Nifty

50

Inception Date

Total number of

Stocks

25-35

01-Apr-06

72 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

THEME

BLUECHIP PLUS A large cap oriented portfolio whilst diversifying risk with Gold ETFs & related instruments. The objective of the Strategy is to seek long term capital appreciation by investing primarily in the equity and equity related instruments of large cap companies whilst diversifying risk with gold ETFs and related instruments

LARGE CAP & GOLD ETF

PROFILE OF PORTFOLIO MANAGERS Mr. Danesh Mistry: 17 years+ of experience in fund management, equity research, mortgages and investment banking including private equity and capital markets. With Tata Asset Management Ltd for more than 10 years in the investment team Mr. Surjit Singh Arora: 15 years+ of experience in equity Research and Fund Management. With Tata Asset Management Ltd. for more than 4 years in the investment team.

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

15.0%

13.6%

7.0%

8.6%

13.4%

13.6%

7.6%

7.8%

10.3%

10.2%

Standard Deviation 17.76%

23.26%

NA

NA

NA

NA

NA

NA

NA

NA

As on 31st Dec 2019 - % based on daily NAV

Average Marketcap

Sharpe Ratio

0.27

As on 31st Dec 2019 - Risk free return = 6%

INR

1 year

306,947Cr.

KEY STRENGTH OF THE STRATEGY

Benchmark

Combination of Equity & Gold. Bottom Up stock picking approach Portfolio will be managed in a conservative fashion and will be diversified across various sectors of the Indian economy.

Nifty 85 15 50 :Gold Blend :

Inception Date

Total number of

25-35

Stocks

01-Oct-11

Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 73

THEME

EMERGING OPPORTUNITIES A mid-cap oriented portfolio with reasonable valuation and higher growth visibility. The objective of this Strategy is to generate capital appreciation with relatively higher risk over the long term.

MID CAP

PROFILE OF PORTFOLIO MANAGERS Mr. Danesh Mistry: 17 years+ of experience in fund management, equity research, mortgages and investment banking including private equity and capital markets. With Tata Asset Management Ltd for more than 10 years in the investment team Mr. Surjit Singh Arora: 15 years+ of experience in equity Research and Fund Management. With Tata Asset Management Ltd. for more than 4 years in the investment team.

1 year

Performance

Strategy

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

9.1%

1.3%

4.2%

13.6%

13.1%

12.7%

8.2%

9.8%

8.7%

12.84%

NA

NA

NA

NA

NA

NA

NA

NA

8.0% Standard Deviation 16.19%

2 years

Benchmark

As on 31st Dec 2019 - % based on daily NAV

Average Marketcap

1 year

Sharpe Ratio

39060Cr.

INR

0.76

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Benchmark

Combination of valuation & growth visibility. Generate capital appreciation with relatively higher risk over the long term

S&P BSE

200

Inception Date

Total number of

25-35

Stocks

01-Apr-06

74 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

THEME

ACT A market agnostic portfolio with a Combination of different investment style - All weather Stocks, Catalysts for Growth and Turnaround Candidates. The objective of the strategy is to generate sustainable capital appreciation over the long term.

MULTI CAP

PROFILE OF PORTFOLIO MANAGERS Mr. Danesh Mistry: 17 years+ of experience in fund management, equity research, mortgages and investment banking including private equity and capital markets. With Tata Asset Management Ltd for more than 10 years in the investment team Mr. Surjit Singh Arora: 15 years+ of experience in equity Research and Fund Management. With Tata Asset Management Ltd. for more than 4 years in the investment team.

Since Inception Strategy

Benchmark

11.65%

11.31%

9.54%

13.23%

Standard Deviation

1 year Sharpe Ratio 0.84

As on 31st Dec 2019 - % based on daily NAV

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Benchmark

Each category has distinct characteristics, operating in different environment, giving an all round character to the portfolio

S&P BSE

200

Inception Date

Total number of

Average Marketcap

123,177Cr.

INR

Performance

25-35

Stocks

12-Feb-19

Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 75

ONE

DESTINATION FOR

PMS & AIF

12000+

Happy Registered Investors We are happy to serve the ever growing number of registered investors in our portal.

Best Financial Services Award 2018

76 | PMS & AIF SPECIAL EDITION JAN 2020

12000+ Registered Investors

125+ PMS Strategies

www.pmsbazaar.com

10+ Countries Support

INVESTMENT TEAM

PMS

Total AUM

121

INR

VALENTIS ADVISORS

147

Investors

PRIVATE LIMITED

Crores

Valentis Advisors Private Limited is a Mumbai-based SEBI registered Portfolio Manager. Valentis has been promoted by Jyotivardhan Jaipuria who spent 21 years at DSP Merrill Lynch prior to founding Valentis. Valentis has an experienced team with aggregate experience of over 90 years in financial markets. We are a fundamental focused firm which believes in generating wealth by deep research on companies and buying and holding them for a long period. Research, research and more research is the focus of the firm’s investment philosophy.

Investment Team Strength

3

INVESTMENT PHILOSOPHY We focus on deep research and are looking to identify companies which offer an asymmetric risk: reward. We do deep fundamental analysis on the companies and have a buy and hold strategy with low churn in the portfolio. We are typically looking for growth companies at a reasonable price.

Fee Structure Fixed Fee

Variable fee

AMC

or

AMC

Hurdle

1.50%

10%

1 Year

2 Year

3rd Year

3%

2%

1%

2.50% st

Exit Load

SEBI Regn. No. INP000005125

nd

Profit Sharing 15% Profit sharing above 10% Hurdle

Invesment Team Fund Management

Data as on 31st Dec 2019

1

NUMBER OF STRATEGIES OFFERED

Research

1

2

PMS & AIF SPECIAL EDITION JAN 2020 | 77

VALENTIS

TH E M E

MULTICAP FUND The Valentis Multi-Cap fund invests in companies in the large cap, midcap, as well as small cap space. The objective is to generate long term compounded return on the portfolio by investing in diversified mix across market caps. The strategy provides flexibility to the fund manager to straddle across market cap curve depending on valuation mismatches.

The core philosophy across all investments remains fundamental deep research on the companies and having a long term buy and hold approach. We are typically looking at buying stocks that are undervalued and are at an inflexion point in growth.

MULTI CAP

PROFILE OF PORTFOLIO MANAGER The fund is managed by Jyotivardhan Jaipuria who has 30 years of financial market experience. Prior to founding Valentis, Jyoti was Managing Director, Head of Research for DSP Merrill Lynch. In his 21 years at DSP Merrill Lynch, Jyoti led the research team to a premier position in India. Jyoti regularly appears in media with his views on the market. He also held various management positions at DSP Merrill Lynch both locally as well as at a Asia-Pacific level.

Mr. Jyotivardhan Jaipuria

1 year

Performance Standard Deviation

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

14.07%

8.46%

NA

NA

NA

NA

NA

NA

21.09%

10.93%

19.63%

11.72%

NA

NA

NA

NA

NA

NA

17.59%

10.84%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

1.47

NA

NA

NA

1.55

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date

8-Oct-18

78 | PMS & AIF SPECIAL EDITION JAN 2020

Benchmark

Given the flexibility across market cap spectrums, the fund is able to offer superior returns and low volatility. The fund has low churn and offers investors an ideal blend of outperformance without compromising the philosophy of protecting capital. The fund has comfortably outperformed its benchmark since inception and across all time periods.

Average Marketcap

155115Cr.

INR

BSE

500

Total number of

Stocks

31

Data as on 31st Dec 2019

PMS

Varanium Capital Advisors Private Limited

Varanium Capital Advisors Private Limited (VCAP) is a SEBI licensed Portfolio Manager & Alternate Investment Fund Manager. VCAP endeavors to provide Investment solution and advisory to HNIs and institutional clients across the spectrum of traditional and Alternate Asset classes. VCAP is the sole and exclusive Investment Advisor to VAM.

Total AUM

318 336 4 Investors

Crores

INR

NUMBER OF STRATEGIES OFFERED

INVESTMENT PHILOSOPHY Positioning - A focused portfolio of high growth businesses with quality management, prominority shareholder interest, strong ‘economic moats’. Stocks chosen on basis of quality & sustainability of earnings .Diligent filtering around key metrics such as ROCE, ROE, capital dilution, cash flow & required Margin Of Safety.

Fee Structure Fixed Fee

Variable fee AMC

Hurdle

1.50%

10%

1 Year

2 Year

3 Year

3%

2%

1%

2.50% st

Research

Exit Load

3

nd

rd

Fund

or

Management

AMC

2

Profit Sharing 20% Profit sharing above 10% Hurdle

3

Investment Committee if any (apart from above)

SEBI Regn. No.INP000005281

Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 79

THEME

VARANIUM LARGE CAP FOCUSED FUND

LARGE CAP

Varanium Large Cap Focused Fund aims to capture India’s Secular Growth Story through an active portfolio management. The fund invest in large cap growth style stocks of Indian Companies.

PROFILE OF PORTFOLIO MANAGER Anant has over 25 years of experience in Portfolio and Risk Management across global asset management firm such as Goldman Sachs and hedge fund- Shumway Capital in the US. In India, his previous experience has been as a CEO of Religare Portfolio Managers, the PMS business of Religare Global Asset Management. Prior to Religare, he headed the Portfolio Management business for Prime Securities.

Professional Qualification:MBA-NYUStern,BE- IIT (Roorkee),CFA & FRM

T.S. Anantakrishnan

1 year

Performance

2 years

3 years

5 years

Since Inception

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

Strategy

Benchmark

21.80%

11.90%

8.70%

7.50%

NA

NA

NA

NA

10.5%

7.8%

Standard Deviation 12.10%

10.80%

15.20%

13.20%

NA

NA

NA

NA

14.8%

12.8%

As on 31st Dec 2019 - % based on daily NAV

Sharpe Ratio

1 year

2 years

3 years

5 years

Since Inception

1.3

0.2

NA

NA

0.3

As on 31st Dec 2019 - Risk free return = 6%

KEY STRENGTH OF THE STRATEGY

Inception Date 01-Nov-2017

80 | PMS & AIF SPECIAL EDITION JAN 2020

Benchmark

Average Marketcap

4,15,135 Cr.

INR

A focused portfolio of high growth businesses with quality management, pro-minority shareholder interest, strong ‘economic moats’.

Nifty

50

Total number of

Stocks

10-20 Data as on 31st Dec 2019

WELCOME TO THE NEW AGE

AIF CAT – 1 INVESTING

H

ave you ever wondered why you invest at all? Is it to generate returns on your investments?

To create a cushion of financial safety for your future? Because you have been told to? Because, hey, everyone else does it. Well, the truth is you work hard in your professional life to ensure you have a fabulous future and your family gets the best you can provide. To ensure this, you certainly want your money to work harder than you to ensure a fantastic future. To have super productive capital, you need to build a portfolio that delivers on this expectation. There is a lot of literature available on portfolio construction, so I will refrain from quoting Markowitz or Ibbotson and Kaplan. Instead, I would like to take the time to tell you about the new age allocation strategy your portfolio needs.

More specifically, why Category 1 Alternate Investment Funds (AIF) should be part of everyone’s portfolio strategy and why they are not an asset class for the ultra-rich but a must-have for your portfolio.

healthcare and education to consumer purchases, logistics, travel and ticket bookings are all getting digitised. The pace of digitisation has accelerated with the help of cheap mobile phones, computers and even cheaper data packages that come with an assurance of very high standards of security and delivery. New age business models across a variety of sectors have become economically viable.

Incumbents across business sectors are feeling threatened as they struggle to provide elevated customer experiences and business solutions at reduced prices.

History has shown that business longevity is not really long enough and a proxy to that is the listed market index constitution. Did you know that only 60% of the companies that constituted the BSE Sensex Index in 2010 continue to do so today? In our opinion, business longevity is set to reduce even further as new age business models gobble up market share and create new markets where none existed, too fast for incumbents to react.

Investing is all about anticipating the future and ensuring your portfolio is aligned to these changes in a way that you reap the benefit as they happen. You have to ensure that the present value of all future cash flows is way more than the risk you take. The modern world is changing at a rapid clip and from our vantage point at Equanimity, we are convinced that the future lies in innovation, technological progress, finding new ways of doing things and new things to do in a sustainable, scalable and profitable manner. Digitisation is omnipresent. Every walk of life right from basic necessities like socialising, banking and finance,

India is going through a clean-up phase and we are seeing politicians, bureaucrats, businessmen, institutions, regulators, rating agencies and auditors being investigated and held accountable.

Since investors are capital providers to businesses, it is important for us to align to this new way of doing business as this new paradigm is here to stay and is a massive structural change, not a passing fad. A necessary part of our diligence and analysis is centred around understanding whether businesses we invest in have reoriented to this new reality. The meagre and dwindling returns you made in the last

PMS & AIF SPECIAL EDITION JAN 2020 | 81

Mr. Rajesh Sehgal, Managing Partner

Equanimity Investments What worked so far doesn’t work anymore. Have you realigned your portfolio to this new reality yet? India has changed and continues to change at a rapid clip. Businesses, and hence, your portfolio, has to keep pace. A 10% to 20% exposure of your portfolio to AIF Category 1 funds or directly to startups is ideal

couple of years from real estate, gold, fixed income, equities, etc. are testimony to the fact that what worked so far doesn’t work anymore. Have you realigned your portfolio to this new reality yet?

The new India is all about transparency, digitization, higher levels of compliance, global standards to adhere to, even by the smallest of businesses with global aspirations and ambitions. There is research suggesting that India’s erstwhile ‘black’ economy was about the same size as the mainstream economy. With the advent of technology and the governments’ adoption of various technology enabled initiatives and new regulations and regulators, a significant portion of this parallel economy has become or is in the process of becoming mainstream. New regulations like GST (for trade and businesses), RERA (for real estate), IBC ( for insolvency), Data protection bill (for personal data handled by businesses and third parties), updated FDI norms (for foreign investments), amended Companies Act and new E-Commerce

82 | PMS & AIF SPECIAL EDITION JAN 2020

rules have brought in real change on the ground. Post demonetisation, JanDhan came into its own and is formally the largest financial inclusion exercise ever executed in the world. UPI, an instant, realtime payment system developed by NPCI to facilitate inter-bank transactions, has 143 banks live on its platform and facilitated 131 crore transactions amounting to over INR 2,00,000 crore in December 2019.

IndiaStack, a set of APIs to allow the government, businesses, startups and developers to solve India’s problems has been instrumental in changing people’s lives.

India has changed and continues to change at a rapid clip. Businesses, and hence, your portfolio, has to keep pace. There is a lot of work to be done. These measures have spawned a new way of doing business.

India, the nation of shopkeepers and entrepreneurs has taken to this new age with gusto. We have seen hosts of technology enabled, capital efficient, new age business models becoming successful across a variety of sectors. Health, education, retail (e-commerce), real estate (co-living and co-working), financial services (digital wallets), manufacturing (industry 4.0) are just some of the many sectors that have seen extensive technological adoption.

This technological revolution will result in a democratised landscape and incumbents that dominate these sectors may be replaced by agile, tech-savvy startups. Your portfolio has to adapt to this mammoth change.

As you explore various routes to powering up your portfolio with early stage companies, you have to understand what this brings to your overall portfolio.

For starters, it adds a healthy dose of diversification to the overall portfolio. The quintessential question for you is about how you participate in this future when most innovative, technology enabled businesses in India are not listed? There are a variety of ways in which your portfolio can get access to startups. By investing in

an AIF Category 1 fund like Equanimity, you will get access to sophisticated investors who have made it their life’s work to invest capital in this exciting ecosystem. Armed with an outstanding track record and supported by a global network of venture partners and advisors, a professionally managed fund like Equanimity has potential to deliver great returns to their stakeholders. A 10% to 20% exposure of your portfolio to AIF Category 1 funds or directly to startups is ideal. It is recommended that you build this size over a period of time and do not jump to these levels suddenly. This should take away vintage risk as well so you don’t have exposure to similar business models that come into the limelight and then quickly fade away. At the same time, adding startups to your overall portfolio adds risk, which is essential to bring in higher returns. Life’s basic financial rules apply here as well: risk and return are two sides of the same coin - higher risk implies higher expected returns.

If your portfolio has exposure to assets such as equity, fixed income, real estate in the form of mutual funds, ETFs or REITs then you can begin by getting exposure to startups via AIF Category 1 funds. Investing through an AIF gives you comfort that professionals overlooking your startup

$

portfolio will be diligent about corporate governance standards and will remain involved with their portfolio companies beyond the quarterly financial reports that are shared by listed companies. We often get asked about liquidity concerns in the startup ecosystem. Our answer to this is simple – assets that lie high on the risk-reward curve sometimes come with liquidity challenges. Liquidity is an issue when investing in mid/small caps and also real estate. With greater risks, come greater expected returns and a professionally managed AIF is best equipped to guide your portfolio through these liquidity challenges and deliver a high risk-adjusted return.

All things considered, you should start off on this journey of realigning your portfolio to some venture fund or Startups. India is changing for sure and it is about time you ask yourself if your portfolio is aligned to the new reality, to the new age, technology enabled businesses that are going to be the engine of growth as India grows into a US$5 trillion economy.

Give your portfolio the edge it deserves.

Investing in Category 1 AIF and startups is not a luxury anymore, it’s a must.

$ PMS & AIF SPECIAL EDITION JAN 2020 | 83

POTENTIAL OF INDIAN REAL ESTATE THROUGH CAT II

AIF INVESTMENTS

T

he Real Estate sector has been reeling under a prolonged down cycle led by high inventory and muted demand. While government’s implementation of Goods and Services Tax (GST) and demonetization led to an initial disruption in the real estate sector, the structural changes over the last two years with the implementation of Real Estate Development and Regulation Act (RERA) and Government’s schemes to push affordable housing, seemed to push the sector towards a new phase of accountability and transparency.

The Rise Of NBFCS The organized real estate lending universe typically comprises Banks, NBFCs and AIFs. Growing NPAs lead to many PSUs being placed under prompt corrective action (PCA) by the RBI. PSUs were therefore reluctant to lend any further to the realty sector. This void was largely filled by NBFCs and HFCs. For the past five years, NBFC loans to the real estate sector witnessed a phenomenal rise. In FY18 alone, NBFCs accounted for a little more than 50% of developer financing. This rampant growth in NBFC/HFC funding came to a sudden standstill when the industry was hit by a major blow sparked by IL&FS defaults that led to a huge and unprecedented liquidity crisis in September 2018.

The Crisis The IL&FS defaults in September combined with the selling of some DHFL CPs at a higher yield sparked a crisis in the credit market. Consequently, the asset liability management (ALM) mismatch that already existed in most NBFC/HFCs created a liquidity crisis which impaired their ability to invest in new assets. This liquidity crisis

84 | PMS & AIF SPECIAL EDITION JAN 2020

which still exists has been a problem for developers already burdened with piling up inventory.

How AIFs are better placed than NBFCs An Alternative Investment Fund (AIF) is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

This money is more long term in nature, typically between 7 to 9 years as compared to an average investments’ tenure, which is typically between 3 to 5 years. As a result, AIFs neither face the ALM mismatch nor are impacted by the credit squeeze.

Hence, in the current scenario, where fresh disbursements have been tough for NBFCs, AIFs have not been impacted.

The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI). They have to adhere to a lot of regulations including interest payments at monthly rests. Due to these restrictions, it is difficult for NBFCs to structure transactions. In today’s scenario, it is important that developers get maximum money into the project so as to avoid any future cash-flow mismatches due to unavailability of capital. AIFs unlike NBFCs can structure transactions in a way that the cash-flows from the project can initially be utilized towards project completion and regular interest servicing does not put a burden on the project.

Opportunities Lie Ahead For AIFs Majority of the NBFC lending is concentrated in the Mumbai and Delhi NCR market. The unwinding of this debt across these two markets will pose challenges over the next couple of years

Even NRIs can participate through AIFs According to a report, NRI investments in the real estate sector have doubled to $10.2 billion in 2018 from $5 billion in 2014. In 2022, when independent India turns 75, the Indian real estate sector is expected to receive as much as 30-35% of NRI remittances accounting for nearly $26 billion, the double of what it received in 2018.

Mr. Sharad Mittal, CEO Motilal Oswal Real Estate

AIFs Neither Face The ALM Mismatch Nor Are Impacted

By The Credit Squeeze.

Hence, In The Current Scenario, Where Fresh Disbursements Have Been Tough For NBFCs, AIFs Have Not Been Impacted. The Current Crisis Presents A Great Opportunity For AIFs Who Could Partner With Large Developers At Really Attractive Valuations/Prices.

for all the stakeholders involved. Along with these challenges, a lot of opportunities shall emerge. Large and well capitalized developers shall have huge opportunities to acquire some of the assets at stressed valuations which would come up over a period of next 2-3 years. These assets could be either through small sized developers who aren’t able to manage projects/ raise capital or through NBFCs stuck in projects due to liquidity issues. The current crisis presents a great opportunity for AIFs who could partner with these large developers at really attractive valuations/prices.

The opportunity can be at various stages arising due to market consolidation and continued halt in NBFC funding: yy Buying Land at distressed valuations from NBFCs/ smaller developers yy Discounting of receivables completed inventory

and

yy Last mile funding - Investments due to undisbursed NBFC sanctions

However, most of these investments have been made in physical real estate where the growth has been minimal due to prices majorly remaining stagnant across cities for the past few years.

Financial real estate assets (like Real estate Funds, REITs) help investors to make superior risk adjusted returns.

Besides, financial assets have way more advantages over physical assets like asset diversification, geographic diversification, active asset management and control, low overhead costs, higher due diligence etc.

Unlike physical assets, returns from financial real estate assets are not dependent on price rise in the property. In fact, the returns are linked to the project profitability.

Given the benefit of AIFs over physical real estate, NRIs have a great opportunity to channelize their money in Indian real estate through financial assets in these times. They can also take benefit of the Double Taxation Avoidance Agreement (DTAA) Treaty that India has with many countries and can enjoy lower taxation by adhering to just a few compliances.

CAN LONG-SHORT FUNDS SMOOTH OUT THE SHORT-TERM CONUNDRUMS OF

EQUITY PORTFOLIOS?

L

ong-short funds are a relatively new addition to the Indian asset management landscape, but they have grown in popularity with an estimated 35 managers having launched long-short Category III AIFs in the past seven years. Prominent players such as Edelweiss, Avendus, DSP, Franklin Templeton, ICICI, IDFC & Tata manage an estimated 12,000cr in longshort funds. In this article, we explain how the investment flexibility of long-short funds can offer a better client experience than traditional equity portfolios.

Equity mutual funds are increasingly being tethered to well defined boxes by SEBI. This is a sensible move for a mass retail product, where standardization & ease of comparison among peers is important. For example, AMCs are restricted to having a single open-ended offering in each of the 9 traditional active equity and 6 hybrid categories respectively. And the asset allocation of these offerings is tightly controlled with an AMFI defined list of large, mid and small cap stocks. For example, a large cap fund must have at least 80% of its AUM in large cap stocks, which are in turn defined as the top 100 companies by full market capitalization. These tight restrictions along with the adoption of total return indices for benchmarking in 2018 has led to shrinking alpha for mutual fund portfolios. In the last two years, we have seen an extreme polarization of equity performance with a handful of large cap stocks contributing to the entire 7.5% rise in the NIFTY, while the CNX Midcap index has fallen -10.0% in the same period.

This cyclical phenomenon has exacerbated the shrinking alpha problem – and even though this will reverse at some point, the structural impediments are still there.

86 | PMS & AIF SPECIAL EDITION JAN 2020

So, is Equity PMS the solution?

Equity PMS’ have a lot more flexibility than mutual funds. They don’t have the same asset allocation constraints or even the requirement to have 65% in equities at all times. This partially solves the stockpicking problem where opportunities don’t come neatly boxed into large, mid & small segments. Unfortunately, equity PMS has a client return problem. While there are several well-managed equity PMS portfolios, there are an equal number of aggressive fund houses that seem to attract client interest at market tops. Client experience across a market cycle is poor because of performance chasing. And this is accentuated by concentrated portfolios, the illiquidity of mid & small caps and a separately managed account platform where inflows continuously buy the same stocks and vice-versa for outflows.

We believe that the flexibility and structure of long-short funds can solve both the shrinking alpha and client experience problems of mutual funds and PMS. Long-short funds offer fund managers the most investment flexibility. Like PMS, long-short portfolios are not restricted to a particular asset allocation or minimum equity percentage. And they have two further degrees of freedom – shorting and leverage.

India is a stock picker’s market and if it is a stock picker’s market to buy companies that will do well, it must also be a stock picker’s market to short companies that will do poorly. Identifying companies that will do poorly is already part of a mutual fund’s research process, but the constraint of being long-only allows managers to only

Mr. Nalin Moniz, CFA

Alternative Equity Edelweiss Asset Management Most important value add of long-short portfolios is a superior client experience because of consistency of returns.

Long-short portfolios fall between traditional debt and traditional equity in the risk-return spectrum.

A common misconception is that leverage is used to amplify risk, whereas in practice long-short funds use leverage to dampen risk by taking short positions.

be underweight these strugglers to the extent of their benchmark weightage.

Leverage for long-short funds is capped at 2x by SEBI’s AIF guidelines. This ability to take exposure greater than 100% through either the use of derivatives or temporary borrowing allows a fund to create hedged portfolios and take advantage of short-term opportunities such as an attractive IPO listing. A common misconception is that leverage is used to amplify risk, whereas in practice long-short funds use leverage to dampen risk by taking short positions.

The 2x leverage cap is in line with prudent global standards set by platforms such as UCITs and is far less than what an individual investor can take in her individual capacity.

in the risk-return spectrum – like hybrid mutual funds such as equity savings or balanced advantage funds. As such they have lower volatility and drawdowns than traditional equity funds and are less susceptible to performance chasing by advisors and clients. 70% of industry AUM in long-short funds is from individuals and our experience has been that anyone who has 1 crore to invest in an AIF – a successful entrepreneur, a CxO or a family office of a business family – has made their money the hard way and values both capital preservation and growth equally. This is a client segment where moderate but consistent returns without the rollercoaster of traditional equity is valued. And this is where long-short funds can meet an important client need.

Globally, hedge funds are a $3.2 trillion industry and occupy approximately 5% of investors’ portfolios. We anticipate that the local long-short industry will grow approximately 5X from Rs 12,000cr to Rs 60,000cr in the next 5 years with a core set of 10-12 credible and large managers who will collectively manage 80% of these assets. The focus is likely to remain equity-oriented strategies but may also expand to include newer asset classes like commodities. We encourage clients and advisors to give the industry a try – the present set of managers have done well for investors and have the right ingredients to keep delighting investors with strong riskadjusted returns.

Perhaps, the most important value add of long-short portfolios is a superior client experience because of consistency of returns. Long-short portfolios fall between traditional debt and traditional equity

PMS & AIF SPECIAL EDITION JAN 2020 | 87

Alchemy Capital Management Pvt Ltd

AUM

314

INR

Alchemy Capital Management Pvt. Ltd (Alchemy India), was set up in 1999 for the purpose of providing Portfolio Management & Investment Advisory Services to its clients. Alchemy India is a Portfolio Management Services (PMS) license holder under the SEBI (Portfolio Managers) Regulations, 1993. Alchemy India originally got its PMS license in year 2000 and started its operations in 2002 with its first client. Currently, Alchemy India provides Discretionary, Non-Discretionary PMS and Investment Advisory services to Individuals, Corporate and Institutional clients. In addition, it also manages 3 offshore funds / mandates and 2 Alternate Investment Funds (AIFs)

Crores

1

Funds OFFERED AIF

About AMC

INVESTMENT PHILOSOPHY

Management

TOTAL

3 1Fund

Research

EMPLOYEES

TEAM

INVESTMENT

The investment philosophy applicable to the Fund and as adopted by the Investment Manager is characterized by the following: Growth at reasonable price: The Investment Manager’s approach is rooted in the hypothesis that India is a high growth economy and that the best way to benefit there from is to identify and invest in companies that are best equipped to take advantage of the emerging domestic and global opportunities.

107

SEBI Regn. No. IN/AIF3/17-18/0381 88 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

Category-III

TARGET FUND

Past few years have been the witness to range of economic disruptions caused by change in regulations, new trade equations, geopolitics, and technologies. We believe that these disruptions also bring in significant opportunities in the long run. In the new economic paradigm, disruption, adaptability, and resilience are the key to a successful, sustainable and thriving business. We believe Quality companies are able to adapt and demonstrate several traits to navigate the same

1000 INR

Theme

Alchemy Leaders of Tomorrow (ALOT)

Crores

with Greenshoe option of 500 CR

Profile of Portfolio Manager Mr. Hiren Ved started his career by working with KR Choksey & Co, a sell side firm known for its value investment approach, and eventually graduated to become the firm’s Head of Research. He brings over two decades of experience in bottom-up stock picking, managing portfolios and managing a high-performance investment team capable of delivering consistent, superior alpha.

Mr. Hiren Ved

STRUCTURE

FUND UNIQUENESS The Fund is a very focused bottom up portfolio consisting of companies that are uniquely positioned as either disruptors or who are adequately equipped to take on and adapt to disruption with a superior business process.

Open Ended

INR

Crores

Crore

10 1

SPONSOR CONTRIBUTION

MINIMUM COMMITMENT

INR

Fees Structure

Fund Management Fees

Detailed Management Fee

Fixed Fee

1 Cr. To 5 Cr - 2.5% / 5 Cr to 10 Cr - 2.25% / 10 Cr and above - 2% 1Cr to 5 Cr - 1.5% / 5 Cr to 10 Cr - 1.25% / 10 Cr and above - 1% /// 15% profit sharing above the hurdle rate of 10%

Variable Fee

Fund Performance Performance

1 Month

3 Month

6 Month

1 Year

2 Year

3 Year

5 Year

Since Inception

Fund

1.0%

-2.8%

-7.8%

-6.0%

-

-

-

-5.5%

0.6%

5.8%

2.5%

7.8%

-

-

-

2.4%

Benchmark (BSE 500)

As on 31st Dec 2019 - Inception Date 3rd Jun 2018

OPEN FOR SUBSCRIPTION Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 89

Ampersand Capital Investment Advisors LLP INVESTMENT TEAM

160

AUM

INR

Ampersand as the name denotes is a collaboration of experienced equity analysts and capital market intermediaries with combined experience of over 70+ years. Ampersand has strong relationships & goodwill within the corporate and investment community, family offices and HNIs. Ampersand commenced operations in 2015 offering investment advisory services delivering returns of ~45% CAGR and has now launched its AIF in September 2017.

Crores

1

Funds OFFERED AIF

About AMC

INVESTMENT PHILOSOPHY

TEAM

INVESTMENT

Growth at right price backed by rigorous analysis. We identify sectors at the cusp of an up-cycle.

We choose companies with improving competitiveness led by management having prudent capital allocation track record. Assess valuation rerating potential, thereby offering favorable outcomes from risk reward perspectives. Our investments are targetted to meaningfully outperform the BSE 500, while protecting downside.

3 2

Research

Fund Management

4

Investment Committee

SEBI Regn. No. IN/AIF3/17-18/0356 90 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

Ampersand Growth

TARGET FUND

Over the next 3 years, India will reap benefits of massive tax and legal reforms undertaken so far. Better social sector governence driven by adoption of digital technology.

500

Increased global recognition in the field of IT, Pharmaceuticals and Specialty Chemicals.

INR

Crores

We are expecting market to be broad based and cyclicals to outperform.

50

Crores

Theme

Opportunities Fund Scheme - I Category-III

SPONSOR CONTRIBUTION

Profile of Portfolio ManagerS

INR

Mr. Arun Subrahmanyam: Around 3 decades of experience in the financial service industry, mostly as an equity research analyst. Last employed as MD, BOFA-ML (2004-15).

Mr. Sanjaya Satapathy: Over 16 years of equity research experience, last employed as Vice President, BOFA-ML (2006-16).

STRUCTURE

FUND UNIQUENESS Highly rated equity research analysts with a combined experience of 45+ years in FII’s brokerages. Sponsor commitment is over 30% of total corpus as on date which addresses agency risk. Ampersand also has one of the lowest cost structures on the street making it a very attractive AIF investment for clients.

Open Ended Crore

INR

1

MINIMUM COMMITMENT

Fees Structure Fund Management Fees

Detailed Management Fee

Placement Fee / Set Up (If Any )

Exit Charges (if applicable)

1% p.a. payable monthly in arrears

10% Profit Sharing with High-water Mark

-

0-1yr: Lock-in 1-2yrs: 1% exit load 2yrs+ : 0% exit load

Fund Performance Performance

1 Month

3 Month

6 Month

1 Year

2 Year

3 Year

5 Year

Since Inception

Fund

-0.20%

2.70%

3.50%

7.10%

2.73%

-

-

19.40%

0.60%

5.80%

2.50%

7.80%

4.43%

-

-

13.20%

Benchmark (BSE 500)

As on 31st Dec 2019 - Inception Date 24th Sep 2017 - Post Expenses & Post Tax

OPEN FOR SUBSCRIPTION Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 91

Carnelian Asset Management INVESTMENT TEAM

175

AUM

INR

Carnelian is an asset management firm based out of Mumbai, founded by industry veterans (Vikas Khemani, Manoj Bahety, Sachin Jain, and Swati Khemani) to pursue their passion towards investing. Founders have more than 7 decades of cumulative experience in capital markets.

Carnelian’s mission is to help clients create and protect their wealth in the most optimal manner. Carnelian aspires to create a global scale asset management platform known for its values and expertise

Crores

1

Funds OFFERED AIF

About AMC

INVESTMENT PHILOSOPHY

TEAM

INVESTMENT

At Carnelian, we believe in growth investing at reasonable valuations & obsess about the risk-reward trade off. As long term investors, prefering definite returns over immediate returns, we don’t mind underperformance in the short term. We are happy to be contrarian when the risk-reward payoff is compelling and don’t mind sitting on cash, when we perceive weakness. Lastly, we are a very conscious of corporate governance and have zero tolerance towards governance issues.

6 2

Research

Fund Management

4

Investment Committee

SEBI Regn. No. IN/AIF3/18 -19/0642 92 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

Carnelian Capital Category-III

Multicap, sector agnostic fund focused on fundamental growth driven Investing across three baskets (Magic, Compounder, Opportunistic).

Magic basket (60%) aims at investing in stocks to capture both earnings growth & valuation re-rating. Compounder basket (30%) aims at investing in growth businesses with an aim to compound on earnings growth.

Opportunistic basket (10%) focuses on capturing short term tactical opportunties. Funds aims to generate ~18-20% return and aims to invest with 3-5 years perspective

TARGET FUND

500

INR

Crores

10

SPONSOR CONTRIBUTION

Profile of Portfolio ManagerS

Crores

Theme

Compounder Fund - 1

INR

Mr. Manoj Bahety has ~20 years of rich and diverse financial services experience with marquee institutions – Edelweiss Securities, Morgan Stanley, RIL, HPCL. Prior to co-founding Carnelian, he has spent 11 years at Edelweiss Securities as Dy. Head – Institutional equity research, Head – Forensic, Thematic & Mid cap research.

He is known for his differentiated non consensus research and has pioneered forensic research, popularly known as “Analysis Beyond Consensus” (ABC research).

FUND UNIQUENESS

INR

Crore

1

The fund offers a unique advantage of investing in 3 baskets which helps not only generate superior returns but also offers diversification. Fund’s capability of doing detailed forensic research and primary & secondary research/scorecards using proprietory tools helps avoid any accidents/investment errors.

MINIMUM COMMITMENT

STRUCTURE

Mr. Sachin Jain has ~18 years of a rich diversified work experience in the Indian capital markets in key strategic roles. He last served as Chief operating officer (COO) – Capital Market Group at Edelweiss overseeing Risk, Technology, HR, Strategy and Operations for various businesses including Institutional equities and Investment banking. He also founded the Prime brokerage Business at Edelweiss, which provides custodial services, clearing services, India access and related services to various institutional and non-institutional clients.

Closed Ended

Fees Structure 1-5 Crore

Plan Annual Fees (% of AUM)

5-15 Crore

15 Crore+

Fixed

Variable

Fixed

Variable

Fixed

Variable

A1

B1

A2

B2

A3

B3

C

2.25%

1.50%

2.00%

1.35%

1.75%

1.10%

0%

Hurdle Rate (Annual)

-

10%

-

10%

-

10%

-

“Profit Sharing* (% above hurdle rate)

-

15%

-

15%

-

15%

20%

Exit charges are applicable on exit after the lock-in period # on redemption amount as per slabs described below : -Between 0 and 12 months : 4% -Between 12 and 24 months : 3% -Between 24 and 48 months: 2% -Between 48 and 60 months: 1% # Lock-in period – 12 months from the date of final closing * Performance fee is without catch-up (For more details on fees, please refer to private placement memorandum.)

Fund Performance Performance

1 Month

3 Month

6 Month

1 Year

2 Year

3 Year

5 Year

Since Inception

Fund

0.96%

13.05%

14.91%

-

-

-

-

16.38%

Benchmark

0.63%

5.93%

3.08%

-

-

-

-

2.16%

(BSE 200)

As on 31st Dec 2019 - Inception Date 31 May 2019 st

Data as on 31st Dec 2019

OPEN FOR SUBSCRIPTION PMS & AIF SPECIAL EDITION JAN 2020 | 93

Equanimity

Management Services INVESTMENT TEAM

120

AUM

INR

Crores

1

Funds OFFERED

Equanimity is a venture capital fund investing in capital efficient, technology enabled, early stage companies.

We seek to offer a superior risk return profile to our investors by investing in businesses that scale sustainably to become meaningful global players.

AIF

About AMC

INVESTMENT PHILOSOPHY

TEAM

INVESTMENT

The Fund aims to invest primarily in unlisted securities of start-ups, emerging or early stage venture capital units mainly involved in new products, new services, technologies, intellectual property rights based activities or pursuing innovative business models. The fund will invest in technology enabled businesses in India thereby providing investors exposure to the disruptors and new-age businesses.

The Fund plans to invest in about 20 companies over a period of 3 years. These will primarily be technology enabled businesses from various industries like BFSI, Education, Healthcare, Consumer, Enterprise solutions, Media & Entertainment, Data analytics, Internet of Things, Artificial Intelligence, Machine Learning etc.

Research

4 3

Fund Management

2

Investment Committee

SEBI Regn. No. IN/AIF1/17-18/0337 94 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

Equanimity Category-I

The Fund aims to invest primarily in unlisted securities of start-ups, emerging or early stage venture capital units mainly involved in new products, new services, technologies, intellectual property rights based activities or pursuing innovative business models. The fund will invest in technology enabled businesses in India thereby providing investors exposure to the disruptors and new-age businesses. The Fund plans to invest in about 20 companies over a period of 3 years. These will primarily be technology enabled businesses from various industries like BFSI, Education, Healthcare, Consumer, Enterprise solutions, Media & Entertainment, Data analytics, Internet of Things, Artificial Intelligence, Machine Learning etc.

TARGET FUND

200

INR

Theme

Ventures Trust

Crores

SPONSOR CONTRIBUTION

Profile of Portfolio Manager

of Fund size

A Wharton alumnus, Rajesh has earlier obtained a management degree from XLRI specialising in Finance and Marketing. He is a CFA charterholder. Rajesh has been an active secondary market investor for the last 24 years, 17 years of which, he worked with the emerging markets group of Franklin Templeton. He was also managing Templeton’s private equity investments over these 17 years. Rajesh has made 20 angel investments since 2007 (already exited 8 profitably) and has a ringside view of the overall startup ecosystem over the past decade.

15

Crores

1. Past track record of Mr. Rajesh Sehgal, Managing Partner. In his personal capacity, he has been an active angel investor for over a decade having made 20 investments and exited 8 of those generating a cash-oncash IRR of 45.90% over a 10-year period.

2. Dr. Mark Mobius is one of the investors in the Fund and also on our Advisory Board

.

STRUCTURE

FUND UNIQUENESS

INR

Mr. Rajesh Sehgal

2.5

%

MINIMUM COMMITMENT

Closed Ended

Fees Structure Fund Management Fees

Detailed Management Fee

Placement Fee / Set Up (If Any )

Exit Charges (if applicable)

2% p.a

- Management fee 2% (returned before carried interest) - Carried Interest 20% (with catch up) - Hurdle rate 10%

Upto 2%

NA

OPEN FOR SUBSCRIPTION

Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 95

ITI

AUM

130

INR

Crores

The Investment trust of India Funds OFFERED AMC was incorporated as Fortune Financial Services (India) Private Limited on June 14, 1991 under the Companies Act, 1956.

It was converted into public company on October 20, 1994.

Further the name changed to “The Investment Trust of India Limited” with effect from June 9, 2018. The Investment Trust of India Limited is in financial advisory services business since its incorporation and financial services conglomerate offering a range of products and services from Lending, Equities and Derivatives trading, Equity Research, Commodities Trading, Portfolio Management Services, Distribution of Mutual Funds, IPO & Insurance products and Investment Banking Services through its subsidiaries.

1

AIF

About AMC

INVESTMENT PHILOSOPHY

Fund Management

TOTAL

1 3

Research

EMPLOYEES

TEAM

INVESTMENT

Generation of Asymmetric Returns: • Ability to participate in rising markets, and yet protect downside or even earn in declining markets due to the flexibility to short.

• Flexibility to reduce equity exposure to overvalued/declining markets, while increasing exposures in oversold/undervalued/rising markets results in asymmetric returns profile.

• This helps to lower volatility in performance, lowers capital risks and increases the odds of beating the indexes (or even long only funds),over a full cycle.

4

SEBI Regn. No. IN/AIF3/17-18/0524 96 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

Category-III

TARGET FUND

2000

To outperform the Nifty index over a full equity market cycle, while protecting downside during equity market downturns along the way; thus lowering volatility of performance & lowering risks; Fund focus on long term capital appreciation

INR

Theme

ITI Long Short Equity Fund

Crores

Profile of Portfolio Manager

Mr. Rajesh Bhatia

• 25+ years of investment experience in Indian equities; Last 11 years in Alternative Investments (Long-Short Fund Management) • Ex CIO, Simto Investments, a subsidiary of Tata Investments; proprietary book • Co-founder & CIO, Heritage India Advisors, Indian advisor to New York based, Heritage Capital, an India long-short equity fund; • Senior VP & Head, PMS, Reliance Capital Asset Management; • Corporate Database, SBC Warburg and IL&FS Private Equity • B. Com; ACMA; Completed CFA program conducted by CFA Institute, USA.

STRUCTURE

FUND UNIQUENESS Winning by not losing : 50% loss requires a 100% gain to arrive at starting level of capital; thus losing less in down years and compounding from a higher level of capital base makes it possible to earn higher compounded equity type returns while taking lower risks

Open Ended

INR

Crores

Crore

1 10

SPONSOR CONTRIBUTION

INR

MINIMUM COMMITMENT

FEES STRUCTURE

Name of Classes Investment Commitment Class B Class C Class D1 Class D2 Class D3

Management Fees

Hurdle Rate

Performance Fee

Operational Expenses

Placement Fee / Set Up(If Any)

Exit Charges (if applicable)

1.50% 2.50% 2.00% 1.00% 0.50%

10.00% NA NA 10.00% 10.00%

15.00% NA NA 15.00% 20.00%

On actual basis

NA

2% if redeemed within one year

Rs. 1 crore and above Rs. 1 crore and above ≥ Rs. 10 crore ≥ Rs. 10 crore ≥ Rs. 10 crore

Fund Performance Performance

1 Month

3 Month

6 Month

1 Year

2 Year

3 Year

5 Year

Since Inception

Fund

2.57%

6.64%

5.42%

9.42%

NA

NA

NA

24.51%

6.05%

3.22%

12.01%

NA

NA

NA

16.98%

Benchmark (Nifty 50)

0.93%

As on 31st Dec 2019 - Inception Date 11 Apr 2018 th

OPEN FOR SUBSCRIPTION Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 97

TCG Advisory

AIF

Service P Ltd (TCG AMC)

2

Funds OFFERED

TCG AMC has 14 years track record of managing Offshore, AIF, PMS, Equities and Debt funds. TCG AMC was awarded Fastest Growing Indian Company Excellence Award at International Achievers Conference, New Delhi. TCG AMC is led by Mr. Chakri Lokapriya

About AMC

INVESTMENT PHILOSOPHY •

Invest across sectors and companies; Accelrating revenue & profit potential top down overlay

•

Due diligence of individual companies; Fundamentals ompetitive positioning & management quality

•

Portfolio of 20-50 companies; Liquidity adjusted weights; Risk vs. Returns

Fund Management

TOTAL

TEAM

3 1

Research

EMPLOYEES

Disciplined, Structured Investment Process: Select Total Universe; Rank listed companies based on Mkt. cap and other metrics; Quantative ranking on sector-specific parameters; Shortlist companies

INVESTMENT

•

11

SEBI Regn. No. IN/AIF3/17-18/0324 98 | PMS & AIF SPECIAL EDITION JAN 2020

Data as on 31st Dec 2019

Theme

SMF Disruption Fund

Category-III

SMF is a disruption fund and invests in companies making and using new age materials such as composites, disrupting traditional ones such as metals, and forestry goods. Technical advances are making it possible to make items from baby diapers to aircraft engine parts with innovative materials. Human aspiration for being stronger, lighter, faster, and environment friendly is driving these product advances. SMF is new to India vs. China 4.5x larger vs. USA 11x larger, and is expected to grow manifold in India. The fund aims to profit by investing in these growth companies

Profile of Portfolio Manager

FUND UNIQUENESS Fund invests majority in innovative companies, plus enabling sectors across capitalization through secondary and primary offerings. SMF Disruption fund aims for absolute returns over a 2-3-year investment horizon. Diversification across sectors lowers the risk to deliver risk adjusted returns

STRUCTURE

Mr. Chakri Lokapriya is the Managing Director of TCG Asset Management Company and holds a MBA Finance from New York University, Leonard N. Stern School of Business, New York. He has 22 years of Global Investment Expertise, managing BRIC, Global Funds at J.P Morgan, New York; BNP Paribus, London; Franklin Templeton, India. He has worked at board levels, invested in numerous Investment Banking mandates worth billions of dollars both as a Foreign (FII) Mr. Chakri Lokapriya and domestic investor. He has managed over $7 billion of investment funds and had built and led Asset Management Companies across geographies. Chakri is regularly invited by National and International Media for his expert views on the Economy and Financial Services Industry.

Open Ended

INR

Crores

INR

Crores

10 1

SPONSOR CONTRIBUTION

MINIMUM COMMITMENT

or 5% of the fund size whichever is less

Fees Structure

Options

Fund Management Fees

Performance Fee

1

2.25%

10%

2

1.75%

15%

3

2.00%

20%

Set Up

Upto 2.25%

Fund Performance Performance

1 Month

3 Month

6 Month

1 Year

2 Year

3 Year

5 Year

Since Inception

Fund

-1.33%

2.15%

-3.48%

-1.37%

-14.28%

-

-

-4.05%

Benchmark Composite Index: (50% CNXMcap & 50% CNXSmcp)

-0.18%

5.51%

-4.51%

-6.93%

-14.97%

-

-

-4.65%

As on 31st Dec 2019 - Inception Date 1st Jul 2017

OPEN FOR SUBSCRIPTION Data as on 31st Dec 2019

PMS & AIF SPECIAL EDITION JAN 2020 | 99

What Asset Allocation is.

And what it is not ` “Remember XYZ stock I told you about 3 months ago? It is up 80% since then”, “ABC ekdum solid Mr.Shankar Sharma hai. Just jump in”, Vice Chairman “PQR kya lagta hai?” & Jt. Managing Director, Sounds like familiar First Global party conversation… or something that you watch financial channels for?

If your end game is to have fun discussions at parties, this is fine. But if your purpose is to protect and multiply your wealth, or to optimise your portfolio, you are frankly approaching the problem from the wrong end!

Why? The answer takes you to Investing Basics 101. And it is to do with Asset Allocation.

Depending on the study you read (and there have been many, conducted over decades), you will find that fully 85% to 92% of the returns of a portfolio come from asset allocation!

You got that right!

Specific stock selection, which eats up most of your/ your adviser’s waking hours contributes only 10 to 15% of the returns.

Moral of the story: it does not make sense to concentrate your resources and time on security or stock selection.

But all the talk you will hear from Portfolio Managers is how good they are picking stocks and great bottom up winners.

The uncomfortable point is: bottom up stock picking is a very very difficult art and nobody in the history of investing has been able to do successfully for decades. Yes, not even Warren Buffet.

Just go and see his record in the past 15 or 20 years and you will see an investor who has missed practically every single multibagger that the US market has given in this period: Amazon, Netflix, Domino’s, Google, Apple (he bought way too late), Facebook, Microsoft, etc.

And an investor who has consistently underperformed the stock indexes.

100 | PMS & AIF SPECIAL EDITION JAN 2020

This is PRECISELY the problem with the “sexy” bottom up stock picking approach. Everybody is relevant in a period. And one fine day, the market changes, and you and your strategy become irrelevant.

Therefore, when picking people to manage your money, check the approach and their strategy.

The Golden Key to Investing Most investors fall in the very familiar trap of getting over exposed to the hot asset class of that era.

But the key point to always keep in mind is that if you start playing every innings thinking that you are going to get a hundred runs, you are never going to be successful. Markets change, sometimes they become easy, sometimes very tough.

The key to successful investing, over the long term, is to have every major Asset Class in your consideration set: across countries & currencies and across investible assets: Equity, Fixed Income, Real Estate, Precious Metals, Other Commodities etc The Mantra: There is always a Bull Market somewhere in the world, even as there is a Bear Market elsewhere at the very same time!

View this: Technology in 1998, Emerging Markets 2004-07, Commodities: 2003-08, US equities Tech: 2010 onwards, Japan: 2013-15, Global Fixed Income: 2009 onwards.

Even more recently, 2018 and 2019 have been extremely difficult periods for Indian stock markets.

Barring a handful of stocks, most have been in the negative territory.

But in this very difficult 2019 period, First Global’s Global Portfolio returns have been up 40%!

That’s the beauty of Asset Allocation.

To optimise your portfolio, it is important to have all asset classes in your consideration set and carry out Dynamic and Tactical Asset Allocation.

What Asset Allocation is not The word Asset Allocation is bandied around rather casually these days. Hence it is important to understand what Asset Allocation is not.

We see the word asset allocation used quite widely and we should say, somewhat lightly these days with many financial advisors and fund managers claiming to do asset allocation strategies.

Only when one goes somewhat deeper into this one realises that the Asset Allocation being talked about is in the nature of large cap versus small cap Indian stocks or moving from value strategies to growth strategies in terms of stock choice within the Indian stock market.

The other key is to have a dynamic and tactical asset allocation model, ie assets are to be reallocated based on the tactical view of various asset classes at any point in time.

Just crude measures like at an age of X years you should have 60% exposure to equity and 40% to debt simply don’t work if you are looking to protect and multiply your wealth.

An in-depth understanding of the underlying asset classes is also important. Among other things this is to ensure that the Asset classes are really largely uncorrelated. That comes from data and long experience.

Is your money manager well versed across asset classes, across countries, across currencies?

This combined with some debt allocation, appears to be philosophy underlying the so called asset allocation strategy.

If not, you need to be very careful because you may be getting trapped into the narrow expertise of your money manager, which is fine for him.

In fact, some of the investment documents we have seen even cite the same studies that we mentioned in the last blog that mention that 85 to 92% of a portfolio returns come from asset allocation, with specific stock selection contributing only 8 to 15%.

But can be disastrous for your portfolio.

The problem? The studies cited take into account a portfolio consideration set that is across countries and across asset classes - not just couple of asset classes in a single country!

So for asset allocation strategy to really work in your favour, your consideration set must include all assets: Developed Market Equities, Emerging Market Equities, Developed market Fixed Income, Gold and Precious metals, other Commodities, Real estate (REITs) across countries and so on.

Just changing allocation across different categories of the Indian equity market or even Indian equity and debt markets is simply not good enough!

That is like playing football on 20% of the football field - which it is better than not playing at all...but can it really be called football?

Even within the Indian markets, it is important to look at asset classes beyond just debt and equity.

For example, if one has a positive view on commodities and a positive view on Brazil and Russian equity markets, increasing exposure to both may not be really uncorrelated at all as commodity prices drive many of the large company earnings in these two markets.

Currency alone, or a single country exposure, can also change your portfolio return profile dramatically. But more on that another time.

To conclude, investing is about batting like Sunil Gavaskar: a steady, decidedly “unsexy” approach, careful risk management through diversification across asset classes (Gavaskar played shots all around the wickets, and played well across the world, and played pace and spin equally well).

Bottom up stock picking is a bit like Virendra Sehwag: brilliant when it works. Terrible when it doesn’t. Never steady or predictable. So runs come with high volatility or standard deviation.

Who would you want managing your money: Gavaskar or Sehwag?

The answer is obvious, isn’t it?

For instance, of the last 10 years, in 2 years Gold was the best performing asset class in India (partly due to currency movements) and in another year it was the second best performing asset class. In other years, real estate did extremely well. And now through REITs and some other instruments it is possible to get systematic exposure to real estate as well.

When we, at First Global, talk of asset allocation it means that in your consideration set are practically all the investible Asset classes in the world.

PMS & AIF SPECIAL EDITION JAN 2020 | 101

THE DOUBTFUL NARRATIVE OF SMALL CAP

OUT PERFORMANCE IN THE NEAR-TERM

S

mall cap stocks have significantly underperformed large cap stocks over the last couple of years.

The Nifty 250 Small cap index has underperformed the Nifty 50 index by 20.3% in last one year and by almost 30% over the last two years. This remarkable underperformance has given birth to a popular narrative that small cap stocks have become cheap and are ready to outperform from here on.

While this narrative may be popular it need not be the right one. Indices are made up of all kinds of companies and their performance at times may hide more than it reveals about the real performance of the broader market. Market is a poor judge of character in the short-term, but it rewards the good companies handsomely over the long term. Therefore the investors will be better served by focusing on investing in good companies, irrespective of their size, rather than going solely by the cheap relative valuation. The cheap relative valuation itself is questionable. Nifty 250 Small cap index is currently trading at a historical P/E multiple of 49.5x, not cheap by any standards (https://www.niftyindices. com/Factsheet/ind_Nifty_Smallcap_250. pdf).

This period of underperformance has followed a stunning outperformance in the year 2017 when even dart throwing monkeys, speculating in small and micro caps, outperformed experienced fund managers by a factor of 10. A large part of the subsequent underperformance can be explained as adjustment of the hubris of year 2017. However, there are also more serious and structural reasons for this

102 | PMS & AIF SPECIAL EDITION JAN 2020

underperformance that the investor should be aware of since some of these reasons may lead to continued underperformance by small caps.

The slowdown in the economy over the last 18 months has created far more challenges for smaller companies than their large competitors. Large companies have been able to continue to grow sales volume even in the face of slowing demand. In consumer staples industry companies like HUL and Dabur were able to grow sales by providing working capital support to their distributors and by continuing to invest in advertising and promotions. The smaller players in the same industry have suffered because they do not have the balance sheet strength to support their channels.

This has led do the channels destocking their products and stocking the products of larger companies with better brands and financial strength. We have also seen instances where the larger player has increased its market share in the downturn by forcing the channel partners to destock products of smaller competitors. The recent spat between Asian Paints and JSW Paints is a case in point (for details: https://www. financialexpress.com/industry/cci-ordersprobe -against-asian-paints-allegedthreat-to-jsw-paint-dealers/1824428/). We expect to see many more such complaints in the coming months. But the damage to the business will be well and done by the time any legal remedy becomes available.

The impact of lack of financial capital is evident immediately. There is a reduction in capex (even maintenance capex), marketing and promotion and research and development. The stress is severe for

gaps these companies sacrifice their ability to grow in line with the industry growth when the industry and economy pick up.

In a nutshell, they are forced to sacrifice their long term competitive edge in order to survive the down turn.

Mr. AbhayAgarwal, Founder & CIO, Piper Serica PMS

Market is a poor judge of character in the short-term, but it rewards the good companies handsomely over the long term. Therefore the investors will be better served by focusing on investing in good companies, irrespective of their size, rather than going solely by the cheap relative valuation

companies that have high debt and fixed operating expenses. To protect their credit rating they typically react by reducing working capital which has an immediate impact on sales volume. Some are forced to sell parts of businesses or assets that would have provided long term growth (for instance, Shankara Buildcon’s sale of its steel business to APL Apollo). While the larger companies are able to sacrifice part of their profit margin to increase sales volume and market share, the smaller companies are left with no choice but to protect their margins even if the sales growth is negative. This continuous loss of market presence and market share has along-term damaging impact.

The equally significant long-term negative impact of a slow-down on smaller companies is the deterioration of human capital. To cut costs these companies typically lay off middle and junior level managers leading to poor morale in the remaining work force and a deterioration in their market presence. These layoffs impact the long term culture that these companies build over a period of time.

More importantly, by creating leadership

This is one of the main reasons that industry leaders emerge from downturns with higher market share. We have seen this play out in multiple sectors that now have a strong leader with a market share of over 50% like in aviation, mortgages, four wheelers etc. Even in telecom, the financially strong company has taken away market share from the weaker competitors. In many of the industries, the smaller companies will be left with broken business models and balance sheets.

At best, many of them will just muddle along for many years without creating any shareholder value.

Therefore, the investors should not get carried away by the theory of meanreversion of valuation. It is not the time to blindly switch from large caps to small caps.

Even if an investor would like to selectively allocate capital to small cap companies she would do well to ensure that such companies have not lost their competitive edge in the downturn.

A good way to invest in small caps then would be to focus only on small caps that are market share leaders of their industry.

For instance, our investment strategy, Piper Serica Leader Portfolio Strategy TM, is a unique top-down strategy that is market cap agnostic. We first identify the sectors that will grow for next 15-20 years and then use the 5 Forces Competitive Edge Model to rate the competitive edge of the leader of that industry. If the rating is favourable, we invest in the leader. As the name suggests we invest only in the leader of an industry. Then we dynamically manage the allocations to reduce risk and generate the alpha return. This disciplined process has allowed us to generate market beating returns for our investors. To conclude this write up I would like to share the relative performance metrics of our Leader portfolio with the Nifty 250 Small cap index:

PMS & AIF SPECIAL EDITION JAN 2020 | 103

FINANCIALS

PIPER SERICA LEADER PORTFOLIO STRATEGY

NIFTY 250 SMALL CAP INDEX

3 Year Sales CAGR

16.3%

11.6%

3 Year EBITDA CAGR

20.2%

15.1%

EBITDA Margin

19.1%

14.9%

Average ROE

20.3%

14.5%

Debt/Equity

0.7x

1.95x

So our portfolio is made up of companies that are growing faster, are more profitable and are using much less capital than the companies that constitute the Nifty 250 Small cap index. This is a better way to invest in stocks across the market cap spectrum rather than getting carried away by questionable narratives that are predicated only on the theory of mean reversion.

104 | PMS & AIF SPECIAL EDITION JAN 2020

ONE

DESTINATION FOR

PMS & AIF

What you see through

our data matters

Comparative PMS & AIF data shows you the true picture for right understanding and decisive action

Best Financial Services Award 2018

12000+ Registered Investors

125+ PMS Strategies

www.pmsbazaar.com

10+ Countries Support

Which Is More

VALUABLE

Those were the days, villagers used to rest under the big tree, usually banyan tree, located in the centre of the village. Hard workers, after toiling since dawn till the sun becomes too hot, used to seek the shades of the tree. Many villages use this shaded area as their court, headed by the village Chief. The Chief and his sycophants use the area often as a place of entertainment.

The Chief called out “Navaneeth come here!” Aged about 14, the son of the village teacher, Navaneeth, returning from his far away school, approached the Chief hesitantly. “So, you are going all the way to town to learn, let me check how wise you are?” The Chief took out a Gold coin and placed it in his right palm and few Silver coins in his left palm.

Keeping both palms open, the chief asked “Navaneeth, you can take whichever is more valuable”. The boy with bewildered look thought for few moments, and took the silver coins. The chief and his minions burst out laughing. The boy turned about and ran towards his house. No one appears to have noticed the boy’s impish glee.

The game went on every day and became the routine entertainment for the chief and his entourage. Even on Sundays, Navaneeth made sure he

106 | PMS & AIF SPECIAL EDITION JAN 2020

crosses the banyan tree, as if coming back from town after some errands, every-time the Chief asked, Navaneeth took the silver coins and ran-away.

Meanwhile, The King desired to increase literacy through proper schooling, hence he entrusted, Navaneeth’s father, Kulasekara to recruit more children to the school from the village. Kulasekara organised a gathering under the shades of the banyan tree, to explain the importance of education.

Relevance to Investment

Traders Seek Big Gains Investers prefer

consistent Gains The village Chief arrived at the spot and his group started making fun of the teacher’s explanations and started arguing. The teacher questioned the Chief, “Why are you not allowing the villagers to seek knowledge and wisdom?” Before the Chief could answer, he noticed, Navaneeth was crossing the road, the Chief called out Navaneeth and told the Teacher to silently watch, what his “so-called-learned son is capable of”.

As usual he placed the Gold coin and

the silver coins in his hands and asked Navaneeth to take whichever is more valuable, promptly Navaneeth took the Silver coins and ran-away.

The whole gathering burst-out roaring with laughter, along with minions of the Chief. The teacher, Kulaseakra was confused and silently slipped off from the crowd and reached home.

The father was ashamed and unable to curtail his curiosity, how can his son, who has been going to the school for the past nine years can be so stupid. As soon as he reached home, he summoned his son and asked, “Tell me correctly, how a few Silver coins can be more valuable than a Gold coin?”

Navaneeth beaming with smile started explaining. “Father, I know that the Gold coin is more valuable than the Silver coins. But, had I told this fact to the Village chief, I would have got a Single Gold coin only, and the Village Chief would have stopped asking me again”, Navaneeth continued joyfully bringing his big bag of Silver coins to his father, “I would have never gathered such a lot-of-silver coins, over the months.

See, now I have Silver coins worth more than many gold coins”. I have been amassing wealth, while the chief and his entourage enjoyed their joke.

Moral of the Story

Consistent small gains are better than single and rare big gain.

Vishuddha Capital Management An introduction There are three critical elements of our boutique asset management firm with the first one being co-investment with our clients. Treat your clients as you would treat yourself. To demonstrate this, we have invested a majority of our net worth in the fund alongside our clients. Secondly, our holding structure enables the involvement of analysts in the investment decision making process and also in the carry pool which we believe is critical in longevity and ownership of the team. Lastly, we have the ability to be independent in our thinking and contrarian in our research process.

Why investment frameworks are important?

In our view, a well-designed investment framework helps the investment team to structure and formalize the investment process and be numeric and thereby, objective in its stock-picking approach. An investment framework also serves as a decision-support tool by decomposing the problem, focusing attention on the relevant factors, hiding irrelevant factors, and more objectively weighing the evidence.

Such a structured framework offers less room for narratives shaped by emotions, expectations, desires, and the earliest data points to distort our perceptions and bias our choices. As a consequence, an investment framework can make it more difficult to rationalize and remain overconfident in poor decisions and hence, avoid mistakes.

Investment framework We work towards classifying businesses as either Great, good or bad. This is achieved by evaluating companies across our ten tenets of investment framework which are divided into quantitative and qualitative metrics. Each of the parameters would also have sub tenets. Broad description of the ten tenets in our investment framework is as follows.

1. ROIC vs WACC – We are looking for companies which consistently generate a ROIC higher than the cost of capital across business cycles for a long period of time.

Mr. Aditya Sood Founder & Lead Fund Manager

Great businesses are the ones which not only have a consistently high ROIC but also have large reinvestment opportunities that helps them achieve strong growth for a long time into the future.

2. Capital Structure – Typically, economics of a great business with durable competitive advantage is such that it does not have to raise capital from external sources to fund growth. Hence they generally have very low portion of debt in their capital structure with minimal equity dilution.

3. Cash Flow – Accrual accounting leaves a lot to be desired when it comes to reflecting the actual economic situation of a company.

Great businesses usually have conservative accounting practices that leads to high translation of EBITDA to operating cash flow (OCF) consistently for a long time. A company which is not translating its EBITDA to OCF is a red flag for us.

4. Growth – We believe growth is one of the most important characteristics of generating long term wealth in India. We would generally avoid even seemingly great businesses if we believe the mediumterm and long-term growth potential of the company doesn’t meet our minimum threshold criteria thereby eliminating what we call as quality traps.

5. Covenants – We make an attempt to understand the financial covenants of the companies we evaluate as they are generally restrictive in terms of dividend payout and acquisitions.

6. Competitive advantage – We spend a lot of time understanding the competitive advantage of the business. Mere presence of the advantage is not sufficient to classify it as a great business as they usually have advantages that are sustainable for a long time.

7. Pricing – Industry pricing practices is very important in evaluating a business.

We believe there are many high growth industries with large opportunity size but

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struggle to make sufficient return on capital due to predatory pricing practices. A great business is the one that has pricing power even in such an industry.

8. Character of management – We believe this is another extremely critical aspect in understanding the long-term outlook for a minority shareholder in the company. We try to bring objectivity to this analysis by looking at historical trend in a company’s off-balance sheet items like contingent liabilities, related party transactions, auditor profile and audit fees.

9. Alignment of interest with minority shareholders – We want managers who run the business to have their incentives aligned with the well-being of the minority shareholder. Hence, we monitor some key metrics like trend in executive compensation to reported profits, management shareholding bias towards owner operator vs professionally managed business and the managers’ capital allocation skills.

10. Dependence on external variables – Regulatory risk and other exogenous uncontrollable factors are the aspects we evaluate here. Great businesses usually are simple and predictable which have little impact from changing regulatory structure and other macro variables in their target markets.

Investment decision making process We prefer to have a research process that makes logical sense and more importantly that is repeatable across businesses. This is very

108 | PMS & AIF SPECIAL EDITION JAN 2020

critical in objectively evaluating a business and minimize the chances of emotional or instinct based decisions. Our three levers of investment decision making are as follows : 1. Buy – Buy “Great” businesses at fair value, “Good” businesses at a discount to fair value and avoid “bad” businesses 2. Size – Size high quality companies with ability to sustain growth and more importantly have a low downside 3. Sell – Sell when incremental upside/ downside is unfavorable or if there is any deviation from the original thesis (or simply if we were wrong in our original thesis) Our endeavor is to buy great businesses at fair value and good businesses at a discount to fair value which we define as 1/3rd of intrinsic value. As a starting point, we have carefully chosen sectors and themes where we would like to invest (Auto and Auto ancillary, Financials, Consumers, Healthcare, Technology and Manufacturing). More importantly, we are clear about the sectors we would typically avoid which include Commodities, Oil & Gas, Investment holding companies and Utilities.

India Value and Growth Fund is a focused equity portfolio of 25 stocks that endeavours to generate long term capital appreciation by investing in growth companies, across market capitalizations. We believe constructing a quality portfolio high RoIC of 25 percent with high earnings growth FY19-21 of 21 percent and moderate TTM P/E 24 is a good combination to generate attractive returns.

Join the India Growth Story with the

MOST CONSISTENT PORTFOLIO MANAGER OF THE COUNTRY

Awarded by BSE Tefla’s 2018 & 2019

Value of INR 1CR Invested In March 2012 as on December 2019 INR

3.97

INDIA 3T PMS FUND VS CR @ 19.45% CAGR

BENCHMARK: S&P BSE 500 INR 2.35 CR @ 11.62% CAGR

Narnolia Outperforms Not By Chance, But By Design Trusted Investment Advisory & Management Firm since 1997.

Pioneer in Model Portfolio Advisory, running since 2009 with 18% CAGR vs 8% in Nifty.

Strong team of 40 analysts

Over $ 1.5 Billion of AUCAM

Serving over 50 Broker Partners, Fund Houses & Institutional Investors & 3 lac Investors

Outperforming all known diversified PMS schemes consistently since inception (March 2012) & Generating Positive Return over last 2 Years in the backdrop of sharp broader market correction.

(Source: PMS Bazaar, Money Control)

About Narnolia PMS Scheme: India 3T Investment Philosophy

India 3T follows a proprietary comprehensive Fundamental bottom up research model involving Information mining, financial modeling, deductive reasoning based investment thesis and active & rigorous tracking for changes in earnings & quality outlook to frame a portfolio that emphasizes on all three aspects of selection, allocation and combination of portfolio management. The strategy strives for active alpha generation through investing in companies with rising relative growth and valuation.

Objective

The key objective of the India 3T Strategy is to outperform S&P BSE 500 (the strategy’s benchmark) while tracking it on a sustainable risk adjusted basis. This is done by managing the beta of the portfolio to S&P BSE 500 while adding alpha opportunistically based on a rigorous bottom up proprietary model. The portfolio construction is optimized to hit singles and doubles as opposed to fours and sixes. This makes it very resilient especially in bearish and sideways markets by minimizing the negative effects of de-leveraging in such environments.

4 Pillars of Investment Framework

1

Principle Of Growth In Value

Among various proven philosophy of investing, our chosen style is ‘Growth in Value’. Here the word value is derived from the word valuable i.e. factors that make a company more valuable

4

2

3

Seeking Linear Consistent Growth

Prefer companies where improvement happens linearly in small steps over a relatively longer period of time as these companies valuation multiple expands alongwith earnings and then does not contract in a hurry

360° Deductive Reasoning Framework

Insist on knowing why and how a company makes its revenue both from broad picture basis- understanding the addressable market and dynamics as well as microscopic financials- valuation level perspective

Risk Manager’s Mindset

Portfolio has a pre-determined risk return expectation framework which enables taking active risk keeping in mind economic exposures, liquidity risk and stock- sector – cap- theme weightages.

We Are Recognised

When Industry Leaders validate and endorse superiority of our products and services, it speaks about the performance of our products and services.

Most Consistent Portfolio Manager India’s Most Promising of the Country 2018 & 2019 by BSE Tefla’s Brand 2017 by WCRC

Inspirational Leader 2018 by WCRC, in London

Call us: +91 91689 16111 Email us at: pms@narnolia.com Narnolia Financial Advisors Ltd.: SEBI Registered Portfolio Manager having Permanent Registration no. INP000006420. Registered office: Marble Arch, 2nd Floor, Office 201, 236B, A J C Bose Road, Kolkata 700 020, Correspondence Office: Arch Waterfront, 5th Floor, Block GP, Saltlake, Sector 5, Kolkata 700 091. CIN: U51909WB1995PLC072876. Investment in Securities Market is subject to Market risks, read all the related documents carefully before investing. Past performance may not be indicative of future results and no promise or guarantee can be given for the same. For detailed disclosures & disclaimers please refer to our website at www.narnolia.com

PORTFOLIO MANAGERS REGULATIONS

1993 vs 2020

An initiative by

Supported by

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Defini�ons: “change in control”, in rela�on to a por�olio manager being a body corporate, means:─ in any other case, change in the controlling interest in the body corporate; Explana�on. ─ For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, whether direct or indirect, to the extent of at least fi�y one percent of vo�ng rights in the body corporate;]

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2 d(i)(c)

2 (cb)

“por�olio manager” means any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discre�onary por�olio manager or otherwise) the management or administra�on of a por�olio of securi�es or the funds of the client, as the case may be;]

2 (1)

2 (d)

“principal officer” means an employee of the por�olio manager who has been designated as such by the por�olio manager;

2 (1)

6 (2)(c)

Considera�on of Applica�on the principal officer of the applicant has either– (i) a professional qualifica�on in finance, law, accountancy or business management from a university or an ins�tu�on recognized by the Central Government or any State

7 (2)

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Defini�ons: “change of status or cons�tu�on” in rela�on to a por�olio manager─ ii) in any other case, change in the controlling interest in the body corporate; Explanation. ─ For the purpose of sub-clause (ii), the expression “controlling interest” means, (A) an interest, whether direct or indirect, to the extent of at least fi�y one percent of vo�ng rights in the body corporate; (B) right to appoint majority of the directors or to control the management directly or indirectly. (o) por�olio manager means a body corporate, which pursuant to a contract with a client, advises or directs or undertakes on behalf of the client (whether as a discre�onary por�olio manager or otherwise) the management or administra�on of a por�olio of securi�es or goods or funds of the client, as the case may be: Provided that the Por�olio Manager may deal in goods received in delivery against physical se�lement of commodity deriva�ves. (p) “principal officer” means an employee of the por�olio manager who is responsible for: (i) the decisions made by the por�olio manager for the management or administra�on of por�olio of securi�es or the funds of the client, as the case may be. (ii) all other opera�ons of the por�olio manager.

Considera�on of Applica�on (c) the applicant has appointed a compliance officer; (d) the principal officer of the applicant has– (i) a professional qualifica�on in finance, law, accountancy or business management from a university or an ins�tu�on recognized by the Central

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Government or a foreign university; or (ii) an experience of at least ten years in related ac�vi�es in the securi�es market including in a por�olio manager, stock broker or as a fund manager (iii) a CFA charter from the CFA Ins�tute. d) the applicant has in its employment minimum of two persons who, between them, have at least five years experience21 [in related ac�vi�es in por�olio management or stock broking or investment management] or in the areas related to fund management;

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Government or any State Government or a foreign university or a CFA charter from the CFA ins�tute; an experience of at least five years in related ac�vi�es in the securi�es market including as a por�olio manager, stock broker, investment advisor or as a fund manager. (ii) experience of at least five years in related ac�vi�es in the securi�es market including in a por�olio manager, stock broker, investment advisor, research analyst or as a fund manager; and (iii) the relevant NISM cer�fica�on as specified by the Board from �me to �me.

Provided that at least 2 years of relevant experience is in por�olio management or investment advisory services or in the areas related to fund management.”

Provided further that a por�olio manager, who was granted a cer�ficate of registra�on prior to the commencement of the Securi�es and Exchange Board of India (Por�olio Managers) Regula�ons, 2020, shall comply with sub clauses (i) and (ii) of clause (d) of sub-regula�on (2) of regula�on 7 within thirty-six months from such commencement.

In addi�on to the Principal Officer and Compliance Officer, the applicant has in its employment at least one person with the following qualifica�ons: (i) gradua�on from a university or an ins�tu�on recognized by the Central Government or any State Government or a foreign university; and (ii) an experience of at least two years in related ac�vi�es in the securi�es market including in a por�olio manager, stock broker, investment advisor or as a fund manager: Provided that any employee of the Por�olio Manager who has decision making authority related to fund management shall have the same minimum qualifica�ons and experience as specified for the Principal

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Officer in clause (d) of sub-regula�on (2) of regula�on 7: Provided further that a por�olio manager, who was granted a cer�ficate of registra�on prior to the commencement of the Securi�es and Exchange Board of India (Por�olio Managers) Regula�ons, 2020, shall comply with sub clauses (i) and (ii) of clause (e) of sub-regula�on (2) of regula�on 7 within twelve months from such commencement;

7

Capital Adequacy Requirement. - The capital adequacy requirement referred to in clause (g) of regula�on 6 shall not be less than the networth of two crore rupees:

9

9A

Condi�ons of registra�on. ─ (1) Any registra�on granted under regula�on 8 shall

11

(g) the applicant fulfills the net worth requirement specified in regula�on 9; (h) the applicant, its director or partner, principal officer, compliance officer or the employee as specified in clause (e) is involved in any li�ga�on connected with the securi�es market that has an adverse bearing on the business of the applicant; Net worth Requirement The net worth referred to in clause (g) of regula�on 7 shall not be less than five crore rupees: Provided that a por�olio manager, who was granted a cer�ficate of registra�on prior to the commencement of the Securi�es and Exchange Board of India (Por�olio Managers) Regula�ons, 2020, shall raise its net worth to not less than five crore rupees within thirty-six months from such commencement: Provided further that the por�olio manager shall fulfill the net worth requirements under these regula�ons, separately and independently, of the capital adequacy requirements, if any, for each ac�vity undertaken by it under the relevant regula�ons.

Explana�on. ─ For the purposes of this regula�on, "net worth" means the aggregate value of paid up equity capital plus free reserves (excluding reserves created out of revalua�on) reduced by the aggregate value of accumulated losses and deferred expenditure not wri�en off, including miscellaneous expenses not wri�en off.

Condi�ons of registra�on.

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be subject to the following condi�ons, namely: (a) where the por�olio manager proposes to change its status or cons�tu�on, it shall obtain prior approval of the Board for con�nuing to act as such a�er the change; (b) it shall pay the fees for registra�on in the manner provided in these regula�ons; (c) it shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other par�culars of the complaints received; (d) it shall maintain capital adequacy requirements specified in regula�on 7 at all �mes during the period of the cer�ficate (e) it shall abide by the regula�ons made under the Act in respect (f) of the ac�vi�es carried on by it as por�olio manager.

(2) Nothing contained in clause (a) of subregula�on (1) shall affect the obliga�on to obtain a fresh registra�on under sec�on 12 of the Act in cases where it is applicable.

10

Procedure where registra�on is not granted.─ (1) Where an applica�on for grant of a cer�ficate under regula�on 3 does not sa�sfy the requirements set out in regula�on 6, the Board may reject the applica�on, a�er giving an opportunity of being heard.

(2) The refusal to grant registra�on shall be communicated by the Board within thirty days of such refusal to the applicant sta�ng therein the grounds on which the applica�on has been rejected.

(3) Any applicant may, being aggrieved by the decision of the Board under subregula�on (1), apply within a period of thirty days from the date of receipt of such in�ma�on, to the Board for reconsidera�on of its decision.

13

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11. The cer�ficate of registra�on granted under regula�on 10 shall, inter alia, be subject to the following condi�ons, namely: (a) the por�olio manager shall abide by the provisions of the Act and these regula�ons; (b) the por�olio manager shall forthwith inform the Board in wri�ng, if any informa�on or par�culars previously submi�ed to the Board are found to be false or misleading in any material par�cular or if there is any material change in the informa�on already submi�ed; (c) the por�olio manager shall pay the fees for registra�on in the manner provided in these regula�ons; (d) the por�olio manager shall take adequate steps for redressal of grievances of the investors within one month of the date of the receipt of the complaint and keep the Board informed about the number, nature and other par�culars of the complaints received; and (e) the por�olio manager shall maintain the net worth specified in regula�on 9 at all �mes during the period of the cer�ficate.

Procedure where registra�on is refused (1) A�er considering an applica�on made under regula�on 4, if the Board is of the opinion that a cer�ficate should not be granted to the applicant, it may reject the applica�on a�er giving the applicant a reasonable opportunity of being heard.

(2) The decision of the Board to reject the applica�on shall be communicated to the applicant within thirty days of such decision.

Effect of refusal to grant cer�ficate Any por�olio manager whose applica�on for a cer�ficate has been refused by the Board shall on and from the date of the receipt of the communica�on under subregula�on (2) of regula�on 13 cease to carry on any ac�vity as por�olio manager.

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(4) The Board shall reconsider an applica�on made under sub regula�on (3) and communicate its decision as soon as possible in wri�ng to the applicant.

12

12 A

12B

Payment of fees, and the consequences of failure to pay fees.─ (1) Every applicant eligible for grant of a cer�ficate shall pay fees in such manner and within the period specified in Schedule II. (2) Where a por�olio manager fails to pay the fees as provided in Schedule II, the Board may suspend the cer�ficate, whereupon the por�olio manager shall forthwith cease to carry on the ac�vity as a por�olio manager for the period during which the suspension subsists

ELIGIBLE FUND MANAGERS Defini�ons For the purposes of this Chapter, unless the context otherwise requires (i) The term “eligible fund manager” shall have the same meaning as assigned to it in sub sec�on (4) of Sec�on 9A of the Income-tax Act, 1961. (ii) The term “eligible investment fund” shall have the same meaning as assigned to it in sub sec�on (3) of Sec�on 9A of the Income-tax Act, 1961.

Applicability (1) The provisions of this Chapter shall apply to eligible fund managers exclusively, pertaining to their ac�vi�es as por�olio managers to eligible investment funds.

(2) All other provisions of these regula�ons and the guidelines and circulars issued thereunder, unless the context otherwise requires or repugnant to the provisions of this chapter, shall apply to eligible fund managers in rela�on to

15

16

18.

Payment of fees, and the consequences of failure to pay fees. ─ (i) Every applicant eligible for grant of a cer�ficate shall pay fees within 15 days of receiving in�ma�on from the Board in such manner as specified in Schedule II. Provided that the Board may on sufficient cause being shown allow the por�olio manager to pay such fees at any �me before the expiry of one month from the date on which such fees become due. (ii) Where a por�olio manager fails to pay the fees as provided in Schedule II, the Board may suspend the cer�ficate, whereupon the por�olio manager shall forthwith cease to carry on the ac�vity as a por�olio manager for the period during which the suspension subsists.

ELIGIBLE FUND MANAGERS Applicability (a) The provisions of this Chapter shall apply to eligible fund managers exclusively, pertaining to their ac�vi�es as por�olio managers to eligible investment funds. (b) All other provisions of these regula�ons and the guidelines and circulars issued thereunder, unless the context otherwise requires or is repugnant to the provisions of this chapter, shall apply to eligible fund managers in rela�on to their ac�vi�es as por�olio managers to eligible investment funds.

Procedure to be followed by an applicant for fresh registra�on.

An applicant who is a body corporate who intends to act as an eligible fund manager may be granted registra�on under regula�on 10 if:

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their ac�vi�es as por�olio managers to eligible investment funds.

14(2)(a)

14(2)(b)

Contract with clients and disclosures The por�olio manager shall provide to the client, the Disclosure Document as specified in Schedule V, along with a cer�ficate in Form C as specified in Schedule I, at least two days prior to entering into an agreement with the client as referred to in sub-regula�on (1).

22 (2)

(iv) the performance of the por�olio manager: Provided that the performance of a discre�onary por�olio manager shall be calculated using weighted average method taking each individual category of investments for the immediately preceding three years and in such cases performance indicators shall also be disclosed;

22 (4)

22 (6)

14(2)(d)

The por�olio manager shall file with the Board, a copy of the Disclosure Document before it is circulated or issued to any person and every six months therea�er or whenever any material change is effected therein whichever is earlier, along with the

22 (7)

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(a) it fulfills all the condi�ons specified in sub sec�on (4) of Sec�on 9A of the Income-tax Act, 1961; (b) it complies with the requirements specified under Chapter II of these regula�ons, unless specified otherwise in this Chapter; (c) it pays the fees as specified in Schedule II; and (d) it provides a declara�on to the Board as specified in paragraph (2) of Schedule VI. Contract with clients and disclosures. ─ (c) investment approach, areas of investment and restric�ons, if any, imposed by the client with regard to the investment in a par�cular company or industry; Explana�on: An investment approach is a broad outlay of the type of securi�es to be invested in by the por�olio manager for the customer. (d) type of instruments and propor�on of exposure; (e) tenure of por�olio investments; (f) terms for early withdrawal of funds or securi�es by the clients; (e) the performance of the por�olio manager: Provided that the performance of a discre�onary por�olio manager shall be calculated using ‘Time Weighted Rate of Return‘ for the immediately preceding three years and in such cases performance indicators shall also be disclosed: Provided further that the por�olio manager may be allowed to disclose performance segregated on the basis of investment approach; The por�olio manager shall ensure that a copy of Disclosure Document is available on the website of the por�olio manager at all �mes and as soon as the registra�on is granted.

The por�olio manager shall file with the Board, a copy of the Disclosure Document a�er grant of cer�ficate of registra�on before circula�ng it to any client or whenever any material change including change in the investment approach is effected. The por�olio manager shall file the

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certificate in Form C as specified in Schedule I. 22 (8) 22 (9)

22(10)

22(11)

22(12) 15(1)(A)

General responsibili�es of a Por�olio Manager The por�olio manager shall not accept from the client, funds or securi�es worth less than twenty five lacs rupees.

Provided that the minimum investment amount per client shall be applicable for new clients and fresh investments by exis�ng clients: Provided further that exis�ng investments of clients, as on date of no�fica�on of Securi�es and Exchange Board of India (Por�olio Managers) (Amendment) Regula�ons, 2012, may con�nue as such �ll maturity of the investment.

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(Portfolio Managers) Regulations, 2020 - Changes

disclosure document with the material change within 7 working days from the date of the change.

The por�olio manager shall file disclosure document along with the cer�ficate in Form C as specified in Schedule I. The por�olio manager shall disclose a change in the iden�ty of the Principal Officer to the Board and the clients within 7 working days of effec�ng the change.

The por�olio manager shall report its performance uniformly in the disclosures to the Board, marke�ng materials and reports to the clients and on its website.

The por�olio manager shall charge an agreed fee from the clients for rendering por�olio management services without guaranteeing or assuring, either directly or indirectly, any return and the fee so charged may be a fixed fee or a return based fee or a combina�on of both: Provided that no up-front fees shall be charged by the por�olio manager directly or in-directly to the clients.

The por�olio manager shall disclose the range of fees charged under various heads in the disclosure document.

General responsibili�es of a Por�olio Manager.

The por�olio manager shall not accept from the client, funds or securi�es worth less than fi�y lakh rupees: Provided that the minimum investment amount per client shall be applicable for new clients and fresh investments by exis�ng clients: Provided further that exis�ng investments of clients, as on the date of no�fica�on of the Securi�es and Exchange Board of India (Por�olio Managers) Regula�ons, 2020, may con�nue as such �ll maturity of the investment or as specified by the Board.

23 (4)

The por�olio manager shall segregate each client‘s holding in securi�es in separate accounts.

23(11)

The por�olio manager shall ensure that any person or en�ty involved in the distribu�on of its services is carrying out the distribu�on ac�vi�es in compliance with these

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16 (3)

Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993

Investment of clients' moneys and management of clients' por�olio of securi�es The por�olio manager shall invest funds of his clients in money market instruments [or deriva�ves] or as specified in the contract: Provided that leveraging of por�olio shall not be permi�ed in respect of investment in deriva�ves: Provided further that the por�olio manager shall not deploy the clients' funds in bill discoun�ng, badla financing or for the purpose of lending or placement with corporate or non-corporate bodies.

Explana�on.─ For the purposes of this subregula�on: "money market instruments" includes commercial paper, trade bill, treasury bills, cer�ficate of deposit and usance bills.

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24 (3)

24 (4)

24 (5) 24 (6)

24 (8)

24 (9) 24(10) 24(11)

Securities and Exchange Board of India

(Portfolio Managers) Regulations, 2020 - Changes

regula�ons and circulars issued thereunder from �me to �me.

Investment of clients' moneys and management of clients' por�olio of securi�es─ The discre�onary por�olio manager shall invest funds of his clients in the securi�es listed or traded on a recognized stock exchange, money market instruments, units of Mutual Funds and other securi�es as specified by Board from �me to �me, on behalf of their clients.

Explana�on. ─ For the purposes of this subregula�on: "money market instruments" includes commercial paper, trade bill, treasury bills, cer�ficate of deposit and usance bills.

The por�olio manager offering nondiscre�onary or advisory services to clients may invest or provide advice for investment up to 25% of the assets under management of such clients in unlisted securi�es, in addi�on to the securi�es permi�ed for discre�onary por�olio management.

Por�olio Managers may invest in units of Mutual Funds only through direct plan.

The por�olio manager while inves�ng in units of Mutual Funds through direct plan shall not charge any kind of distribu�on related fees to the client. The por�olio manager shall not invest the clients’ funds in the por�olio managed or administered by another por�olio manager.

The por�olio manager shall not deploy the clients' funds in bill discoun�ng, badla financing or for the purpose of lending or placement with corporate or non-corporate bodies.

The por�olio manager shall not invest the clients‘ funds in the por�olio managed or administered by another por�olio manager.

The por�olio manager shall not invest client‘s fund based on the advice of any other en�ty.

The por�olio manager shall not while dealing with clients‘ funds indulge in specula�ve transac�ons i.e, it shall not enter into any transac�on for purchase or sale of any security which is periodically or ul�mately se�led otherwise than by actual

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Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993

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24(13)

16 B.

18

21

Appointment of custodian ─ (1) Every por�olio manager shall appoint a custodian in respect of securi�es managed or administered by it.

(2) Nothing contained in this regula�on shall apply to a por�olio manager– (a) who has total assets under management of value less than five hundred crore rupees; or (b) who performs purely advisory func�ons.

Submission of half-yearly results. ─ Every por�olio manager shall furnish to the Board half-yearly-unaudited financial results when required by the Board with a view to monitor the capital adequacy of the por�olio manager Reports to be furnished to the client. ─ (1) The por�olio manager shall furnish periodically a report to the client, as agreed in the contract, but not exceeding a period of six months and as and when required by the client and such report shall contain the following details, namely: (a) the composi�on and the value of the por�olio, descrip�on of security, number of securi�es, value of each security held in the por�olio, cash balance and aggregate value of the por�olio as on the date of report;

26

27

28

31 (1)

31(1)(a)

Securities and Exchange Board of India

(Portfolio Managers) Regulations, 2020 - Changes

delivery or transfer of security except the transac�ons in deriva�ves.

The por�olio manager shall not execute off market transfers in client‘s account except: (a) for se�lement of the clients‘ own trades; (b) for providing margin/ collateral for clients‘ own posi�ons; (c) for dealing in unlisted securi�es in accordance with the regula�ons; (d) with specific consent of the client for each transac�on; (e) for any other reason specified by the Board from �me to �me.

Appointment of custodian.

Every por�olio manager shall appoint a custodian in respect of securi�es managed or administered by it: Provided that this regula�on shall not apply to a por�olio manager who provides only advisory services

Maintenance of books of accounts, records, etc (a) to (e) Provided that such a record shall be maintained under the signature of the Principal Officer of the por�olio manager Submission of net worth cer�ficate. ─ Every por�olio manager shall furnish to the Board a net worth cer�ficate issued by a chartered accountant as and when required by the Board.

Reports to be furnished to the client. ─ The por�olio manager shall furnish periodically a report to the client, as agreed in the contract, but not exceeding a period of three months and as and when required by the client and such report shall contain the following details, namely: the composi�on and the value of the por�olio, descrip�on of securi�es and goods, number of securi�es, value of each security held in the por�olio, units of goods, value of goods, cash balance and aggregate value of the por�olio as on the date of report;

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31(1)(g)

33 33 (d) 23 A

Appointment of compliance officer.─

Code of Conduct

6.

CONTENTS OF AGREEMENT BETWEEN THE PORTFOLIO MANAGER AND HIS CLIENTS Period of agreement- minimum period if any, and provision for renewal, if any.

Disclosure Document

34

4.

6

2

5 (ii)

Securities and Exchange Board of India

(Portfolio Managers) Regulations, 2020 - Changes

default in payment of coupons or any other default in payments in the underlying debt security and downgrading to default ra�ng by the ra�ng agencies, if any; details of commission paid to distributor(s) for the par�cular client.

Disclosures to the Board.

The Board may ask por�olio manager to disclose any informa�on as and when required including the following:Par�culars rela�ng to the net worth requirement as specified in regula�on 9.

Appointment of compliance officer.─ Provided that the role of compliance officer shall not be assigned to the principal officer appointed in terms of clause (d) of subregula�on (2) of regula�on 7 or the employee of the por�olio manager appointed in terms of clause (e) of subregula�on (2) of regula�on 7.

Code of Conduct A por�olio manager shall not execute any trade against the interest of the clients in its proprietary account.

CONTENTS OF AGREEMENT BETWEEN THE PORTFOLIO MANAGER AND HIS CLIENTS Period of agreement- the agreement shall provide the period of the agreement in years, terms of termina�on and/or provision for renewal in case of a renewable agreement.

Disclosure Document This Disclosure Document is to be filed a�er grant of cer�ficate of registra�on before circula�ng it to any client or whenever any material change including change in the investment approach is effected. In case of material change, the disclosure document shall be filed within 7 working days from the date of the change.

Model Disclosure Document Services Offered Investment Approaches of the Por�olio Manager

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RISK FACTORS

Securities and Exchange Board of India

(Portfolio Managers) Regulations, 2020 - Changes

RISK FACTORS vi) All transac�ons of purchase and sale of securi�es by por�olio manager and its employees who are directly involved in investment opera�ons shall be disclosed if found having conflict of interest with the transac�ons in any of the client‘s por�olio. vii) If the por�olio manager has group companies, a disclosure of conflict of interest related to services offered by group companies of the por�olio manager if any.

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10

Client Representa�on Performance of Por�olio Manager Por�olio Management performance of the por�olio manager for the last three years, and in case of discre�onary por�olio manager disclosure of performance indicators calculated using ‘Time Weighted Rate of Return‘ method in terms of Regula�on 22 of the SEBI (Por�olio Managers) Regulations, 2020.

Audit Observa�ons Audit observa�ons of the preceding 3 years

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CONTAGION EFFECT OF PSYCHOLOGY Insights Folklore

One of the greatest challenges in life is being yourself in a world that's trying to make you like everyone else.

For research purpose, scientists placed 5 monkeys in a cage, with a ladder in the middle and bananas on the top. Every time a monkey went up the ladder, the scientist showered the rest of the monkeys with very cold water.

After a while, whenever a monkey attempted to climb the ladder, others would beat him up. After some time, no monkey dared go up the ladder regardless of the temptation to get the banana.

Scientists then decided to replace one of the monkeys.

As expected, the new monkey instantly fell for the temptation to get the banana and was beaten up by the rest.

A�er several bea�ngs, this new member learnt not to climb up the ladder even though he never learnt the real reason.

PMS & AIF SPECIAL EDITION JAN 2020 | 123

Then, a second monkey was brought in and the same thing happened. The first monkey participated in the beating of the second monkey. The replacements continued, until only a fresh group of 5 monkeys were left in the cage.

Even though the new group of monkeys never received a cold shower, they continued to beat up any monkey that attempted to climb the ladder.

If you asked any of the new monkeys why the beatings took place, the answer would probably be, “Well, how do I know. I guess that's how things are done around here!"

- Reproduced from Advance Africa

Never follow blindly! Before you act, ask why?

That is called informed-Decision 124 | PMS & AIF SPECIAL EDITION JAN 2020

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