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Asset Allocation bachchon ka Khel nahi hai! And 2020 has proved it many times over. 

When the world changes, you have to tactically reallocate your assets, as these snapshots of our global portfolios 4 months apart tell you.

By February, we could see a storm brewing there was plenty of news available for anybody with an open and flexible mind to be able to read the wind) and moved into Fixed Income, Cash plus some commodities. Equity was down to a sliver, at 4%.

The move aggressively back into equities began by the third week of March '20, because our systems signalled a major buying opportunity.

Over the next few weeks, we added Emerging Market equities, Oil etc to our Global Portfolios and Fund.

And presently, the Asset Allocation looks very, very different from what it did a mere 4 months ago.

That is what we mean by Dynamic and Tactical Asset Allocation - something no ETF or single market feeder fund can ever give you.

And what were the results of our tactical management of Asset Allocation?

Hey, pretty good! See for yourself. 

 

 

Check out our performance report for more https://www.firstglobalsec.com/fsglobal-june2020-Performance-Report.php

From the desk of 

Devina Mehra & Shankar Sharma

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

Or WhatsApp us on +91 99206 71949

Chat soon!

https://firstglobalsec.com

 

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What you hear most often, from Fund Managers, is: "We look for great companies that deliver multi-bagger returns".

Sounds Very glam.

But just a slight problem: It is not borne out by data. Most fund managers are lucky even to perform as well as the market - let alone better. 

So why has the "Human only" Investing Model stopped working?

1. Access to Confidential information is difficult. And illegal

The information arbitrage is largely gone. Most information is now publicly and freely available. Professional fund managers can no longer rely on this "privileged, private, often illegal, information  access club" to make money. 

That "edge" is now gone.

Thank God for that.

2. Vast availability of data itself is a problem!

Now there is an ocean of data that exists, whether for countries, sectors or companies.

So what are you supposed to do with this?

The traditional approach is to employ dozens and hundreds of human beings, aka "Analysts",  to analyse and process all this vast flood of daily data.

Trouble is: it is simply not possible for human beings to cope with this deluge.

The human mind is not capable of processing so much information in so little time, so as to be able to make fast decisions in lightning quick markets.

As a result of this inability to process this mountain of daily data, human beings then start taking shortcuts: they start forming lazy, under-analysed, over- simplified opinions.

It does not help that human beings are hardwired to prefer stories & narratives over data, statistics, probabilities etc.

It does not take a genius to figure out that such opinions almost always will be wrong.

And with that, will go down your money.

3. Finally, the most important: human biases can derail the best investment intentions

As is conclusive through plenty of research, human beings are simply unfit to succeed at Investing: they suffer from inability to process vast amounts of data, and then understand them without individual idiosyncrasies, preferences, blind spots. 

In other words, Analysis Without Biases is something Humans simply aren't built for.

Human beings are driven intrinsically by emotions, and less by facts or data.

To give a recent example,  most asset managers had disproportionate exposure to banking and financials, even when it was very clear in February 2020-end,  that the economy would be entering a period of high stress and therefore, leveraged companies would suffer the most.

And even when these companies started to fall sharply, most fund managers could not bring themselves to exit these companies simply because they had become extremely emotionally attached to their holdings.

Endowment Effect, where you see greater value in your holdings simply because you hold them; Loss Aversion which makes it very difficult to book losses, Bandwagon Effect where you want to be where everyone else is;  are all classic biases.

Because of these biases, we see a very high degree of " Storification" risk: A massive risk in which every single position/ holding has been given a certain "story"  and a certain poetic future road map which is almost always extremely rosy, without much or any risks.

Owners and Management of these "storied" companies are built up to be Gods. All the discordant elements (industry cycle, favorable policy, just plain luck) are brushed aside.

The bigger the "Story", the stronger the conviction. 

And as fund managers talk publicly about their conviction, they become committed to that story and security.

When the story stops playing out, the fund manager is unable to see the danger and change. 

This is because they are so convinced, that it's impossible to "un-convince" themselves.

"Storification"  of positions is dangerous: when you have gone out and marketed these positions and defended/ extolled the virtues of these positions publicly, it is almost impossible to change when the facts and data change.

So instead of merely money, fund managers end up investing their emotions in their positions.

Human beings are generally not very good at changing their minds when they are emotionally attached to anything.

Human beings are terrible at accepting mistakes. 

Machines have no such problems.

But Machines have different problems.

The Machine-only Model doesn't work either

There is a school of investing that believes that  quantitative models are the antidote to the human-driven traditional fund management approach.

They are wrong. 

Machines are only as good as the  quality of human beings testing out a million or billion different combinations of factors, in order to arrive at a range of investing strategies that  work.

Therefore, engineers or financial professionals,  without extensive experience of investing, simply cannot produce a workable machine-driven model. 

Almost every single factor needs to be the understood, debated, discussed, modified , based on deep knowledge,  investment experience and Investment thought.

Plus, quants complicate their models, adding too many parameters to get the results they seek - a problem called over-fitting.


If used incorrectly, the models can end up finding meaningless correlations and regard them as Gospel truth - an error that gets compounded when the model is a complete black box without possibility of understanding what are the drivers behind a recommendation, or why something has stopped working.

Also, an only machine-driven model can never be sensitive enough to sudden changes in the environment or in company fortunes. Think a disruptive Covid crisis or a geopolitical development on a macro basis or policy changes which impact a particular industry or company.

Which is why First Global's (Hu)man+ Machine Model is vastly superior to standalone Human or Machine Models

Our fund management team has decades of experience in navigating all kinds of market situations across the world and in India.

When this team sits and builds and tests a machine learning model, on an ongoing basis, the quality of inputs, analysis and factors that go into building a quantitative Machine Learning model are of a completely different level, as compared to merely "quants" building these.

Added to this, tactical strategies are rarely done well by machines, when there sudden changes in fundamentals.

What you need is this edge of best-in-class Human+Machine Model,  that combines the best of the machines and the human beings.

The present and the future of Investing belongs to the combinatorial approach of Human+Machine Model.

But all Human+Machine Models are not equal.

So always ask: 

Who are the Humans running the Machine?

From the desk of 

Shankar Sharma & Devina Mehra

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

Or WhatsApp us on +91 99206 71949

Chat soon!

https://firstglobalsec.com

 

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It was a very interesting June.

Of course so was May. And April. And March. 

2020 has been nothing if not interesting. 

We really wish for more such months. 

At least insofar as our Global Performance is concerned.

 

Global Funds Performance: June '20

The Global Freedom Fund SPC - Global Tactical Strategies SP (GFF-GTS) was up 9.8%

The GMAAP was up 9.9%

Vs MSCI World that was up only 3%

The S&P500 was up 2%. 

The NASDAQ, hold your breath, was up 6%. 

 

Global Funds Performance: Calendar 2020 Year to Date 

GFF-GTS (Dollar terms): +12.3%

GFF-GTS (INR terms): +18.9%

GMAAP (Dollar terms): +10.9%

GMAAP (INR terms): +17.4%

Vs

MSCI World: -7.9%

S&P500: -4.8%

 

India PMS Performance: June '20 

The Equity IS50 was up 3.5%

The Asset Allocation IMAAP was up 1.5%

While the Nifty was up 7.5%

And NSE 500 was up 8.4%

 

India PMS Performance: Calendar 2020 Year to Date 

The IS50 is up 8.9%

The IMAAP is up 6.8%

Vs 

NIFTY 50 that is down 15.3% 

NIFTY 500 that is down 18%

 

Global Performance Analysis

As is very, very clear our Global performance is completely off the charts.

What explains this?

The answer is very interesting.

From the month of May, our systems started detecting a broadening of the Global rally that had started in the last week of March. 

This was in sharp contrast to a very narrow market rally globally and of course in America, from the end of 2016.

We all know just a handful of stocks drove up American markets and it was the same in India as well.

But this started to change from the first week of May '20.

And our massive dashboard or as we call it: Network Operating Center (NOC), started detecting signs of a broadening market up-move.

And our portfolio got positioned accordingly.

Therefore, our positions in in the broader consumer and technology spaces in the US, helped us tremendously. 

We had massive winners like DocuSign, Etsy, Datadog, Square etc (all up 25-35% this month) from the digital economy. 

 Several others in the consumer and a few in the pharma/med space also did very well.

At the same time, we broadened our Holdings into new emerging markets and Japan.

Having Oil and Gold in our portfolio helped deliver great returns with low volatility.

We continue to like both.

All these tactical shifts help in delivering absolutely standout numbers globally.

Most gratifyingly, these returns were made with a very diverse portfolio, not with a few concentrated bets, reducing risk very considerably.

India Performance Analysis

India of course was a completely different kettle of fish.

We had some very good winners in the form of Reliance Industries, Gujarat Gas, Tube Investments, Infosys, Astrazeneca, IPCA etc. as well as our favourites, Alkyl Amines, Navin Fluorine, Sanofi, etc.

But the reality of the rally in India was that it was not a really of "Quality". 

Globally, the rally was in top quality names with very strong earnings outlooks. Something our models are comfortable with.

But in India, it was largely driven by beaten down financials and other sectors (autos, realty) which have been badly hit by the ongoing COVID 19 crisis.

And even within these sectors, the big movers were the relatively poorer quality names (IndusInd Bank and RBL, for instance vs. a HDFC Bank).

If you take a look at the best performers in the NIFTY 50, you will find banks (the worst ones), Tata Motors, Vedanta, BPCL, Hero, SBI, Eicher, Hindalco, etc.

Of all these, we had just Reliance. 

It is not that we did not anticipate a rally in beaten down, high beta, riskier plays. 

It was pretty clear and evident from the first week of May when our systems detected a broadening of the market rally globally.

Our systems also detected a rally in small cap stocks across the world.

The question in such situations is: should you do a large scale change in your portfolio to chase temporary Momentum in highly risky stocks in the market?

Logic and common sense will tell you: by all means do a bit.

But do not go the whole hog.

Because when the tide turns, these high beta names will come back and bite you in some of the most hurtful places in your body. 

So we played the rally in India modestly. 

And we are absolutely fine with lagging a market rally in which low quality, debt-laden, high beta names, rally.

These situations happen routinely and normally in markets and frankly we have seen dozens of them in our three decades of investing.

We just ride them out.

What is most gratifying to us is that the NAV of our India PMS is at an all-time high, even as the market is a long way away from its own high. 

YTD we are UP 9% even as the market is DOWN 15% plus.

We have introduced some very interesting new names in our India portfolios in this quarterly rebalancing.

As you all know, at First Global, we are not rigid or inflexible in our investing approach.

Our human plus machine model delivers results across market situations and time periods.

And it delivers these Returns with the lowest possible risk.

We do not run "High conviction" risk.

We do not run "Storification" risk.

We do not run "High concentration" risk.

And yet we deliver. 

Or maybe, that's why we deliver.

That is the beauty of our proprietary Human+Machine investment model.

More on that later.

For those who aren't invested with us, but want in, just drop us a line on https://bit.ly/2V0RxAx and we will get in touch quicker than India changes lockdown rules.

By the way, you can also WhatsApp us on +91 99206 71949 

Chat soon

From Your Friends at First Global

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

https://firstglobalsec.com

 

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Investing at its heart and soul is avoidance of the big loss.

We, at First Global, look at risk management as a central tenet of our investing process.

While there are quantitative ways to manage risk, this blog post, we want to talk about how to qualitatively manage risk in your portfolio.


Therefore, qualitatively speaking, these are the major risks that you should avoid in your investing journey.

"Storification" risk: when you build a nice story around your Investments, a story that you fall in love with. The risk increases even more when you tell others about this story, as this makes you want more emotionally invested in it.

"Concentration" risk: when you put most of your eggs in one or a few baskets.


"High Conviction" risk: when you get hyper convinced of your investment hypothesis and take large positions in your High conviction ideas.


"Investment Philosophy" risk: when you make some of your investing successes into an investment philosophy, forgetting that many successes in the stock market are random, and based on nothing but good fortune, or being in the right stock at the right time.


All the above are classic investing biases. 

They create rigidities. 

They reduce flexibility.

They make you emotionally invested in your holdings which make taking rational decisions that much more difficult.

Rigidity in anything is avoidable (except in Risk Management, that is).

Rigidity in arteries.

Rigidity in muscles.

Rigidity in thinking.

All completely avoidable, like plague.

We, at First Global, keep our Investment Strategy data-based. Situation based.

We have no rigid philosophy. 

We adapt according to the changes in the markets, the developments in the world.

Marry these with Zero-emotion, System-Driven Risk Management.

That's the First Global Method.

More on our (Hu)man + Machine Investment Model in our subsequent posts.

From the desk of 

Shankar Sharma & Devina Mehra

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

Or WhatsApp us on +91 99206 71949

Chat soon!

https://firstglobalsec.com

 

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This one was a surprise.

With surging unemployment and the near-complete shutdown of several industries, it was logical to assume that personal incomes in the US (as elsewhere) would come down.

The reality? Personal income soared 10.5% in April - the biggest jump this number has seen since the US Bureau of Economic Analysis started compiling the data in 1959!

Go figure. The answer to this puzzle in two words? Uncle Sam.

Incomes went up because of government payouts like the personal stimulus checks and higher unemployment benefits.

Government social benefits accounted for 30%, or $6.3 billion, of personal income in April. That’s up from a monthly average of 17%—or $3.2 billion—in the previous seven months.

However due to restrictions in various states as well as consumer anxiety, US Consumer spending fell 13.6% in April.

The net result: savings rate up to 33% in April from 12.7% AND a lot of consumer spending power pent up, waiting to be let out.

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

Or WhatsApp us on +91 99206 71949

Chat soon!

From the desk of

Shankar Sharma & Devina Mehra

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years 

https://firstglobalsec.com

 

 

Socialise with us at   


   

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Hello Everyone!

In May, the action was all in the global markets. Seriously, India was a dull, boring place, stock-market-wise, to be in, this month (we are all just about getting used to this new type of Indian stock market: either boring. Or down. Or both.)

Globally, Our Strategy in May produced numbers that were quite satisfactory. Actually, better than "satisfactory" as you will see in a moment.

Here they are:

Our Global Performance in May

The GFF-GTS was up 11.7%

The GMAAP was up 9.5%

Vs MSCI World that was up 4%

Heck, we even beat the NASDAQ 100: that was up just 6%, the S&P500 was up just 4%.

All in USD terms, of course.

What does this show?

A few things, that we discuss later in this note.

But most importantly, it shows that:

A.    Smart asset allocation and global diversification can easily beat a narrow, single country -single sector ETF/ Feeder Fund (eg, NASDAQ)

B.     And, managing money this way also reduces risk considerably, because you aren't just riding on the coat-tails of a tech rally

As we all know, tech has sunk many a small boat & large ship, last 20 years. 

And buying a single market ETF or Feeder Fund is usually a recipe for disaster.

Simply because by the time they become hotly marketed, they are already turning cold. 

They simply cannot give you the dream team of improved returns + reduced risk. 

That's not what they are built for. 

As a result of these numbers, now, for the Year, we are:

2020 Year to Date Performance

GFF-GTS (Dollar terms): +2.3%

GFF-GTS (INR terms): +8.5%

GMAAP (Dollar terms): +1%

GMAAP (INR terms): +7%

Vs

MSCI World: -10.6%

S&P500: -6%

India May Performance

India was an okay-ish month. 

Here are our India May numbers:

The IS50 was down 3.8%

The IMAAP was down 0.8%

While the NSE 500 was down 2.5%

Year to Date, 

The IS50 is now flat

The IMAAP is up 9.5%

Vs a 20% down market

In May, we just about kept pace with the Indian market, largely because of the end-of-month rally in beaten down sectors like banks, autos, capital goods, and media. 

We were light on these sectors (sensibly so, we are sure you agree), so understandably, so we lagged the market slightly. 

But that's okay. We aren't in the game to play every move in the market.

Only the ones that our Man+Machine Model believes in - which means sometimes not participating in a pure short-term trading rally in assets our model does not like.

And of course, in India, we have some excellent performers in the shape of Alkyl Amines, JB Chemicals, Navin Fluorine, Astra Zeneca, Deepak Nitrite, and some other good ones. 

We had the much-fancied FMCG names too (Asian Paints, HUL, Relaxo, etcetera), but we trimmed them intra-month, as we found better opportunities elsewhere. We added a couple of IT and metal names, for tactical reasons.

But let's talk Global 

That's where the fun was.

We had a "Brave Bet" that we alluded to last month, in April Performance Report.

Here's what we had written in our April performance report.

Quote

And on April 29th, we put on a "brave" trade Globally. 

But we never ever bet everything on anything. So it's a small but significant 2.5% allocation to a new Asset class on the Global side.

Unquote

Wanna know what that was?

Oil.

Yeah, we went long Oil (via the USO) in April, when it was in the teens. 

That closed at $26 in May end

Pretty decent returns. (Though, of course, the USO lagged WTI quite massively, which doubled in the very same period.)

That's how we do things at First Global.

We are tactical. We are nimble.

We are neither bullish or bearish.

We are always hare-ish.

New country positions

We also added Four new countries in May. Again, controlled, tactical plays. 

They have been good performers in May. And we see them doing well in June.

So what led to our May outperformance? And what does it show?

First up, what our numbers show is that there is plenty of life outside the NASDAQ. 

The whole dumbed-down world of 'Global' Investing is focused on "Buy NASDAQ ETFs and retire" kind of nonsense.

But just when this story is reaching the far lands of India via ETFs and Feeder Funds, the action is moving away, to other kinds of places to make money.

Away from the NASDAQ. 

As it happens so very often, when even the shoe-shine boy starts talking about it.

And true to our promise, our Man+Machine sniffed out a change in global macro. 

It found opportunities outside of the NASDAQ. 

And even within the US, we found opportunities outside of the main indexes. 

That's what led to these May numbers. 

Stick around. This is going to be fun.

For those who aren't invested with us, but want in, just drop us a line on https://bit.ly/2V0RxAx and we will get in touch quicker than India changes lockdown rules.

By the way, you can also WhatsApp us on +91 99206 71949

Chat soon!

At least, you can leave the investing to us.

Chat soon!

From Your Friends at First Global

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

https://firstglobalsec.com

 

Socialise with us at   


   

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