Learnings from Top Portfolio Manager of India | 2021

2021 has been a great year for our PMS product - we had a return of 54% till date as against 29% for the NSE 500!

As of November end, on a relative basis, we are far ahead of all large or multicap PMS schemes. Even more important, these returns came with extremely low volatility such that on risk-adjusted measure (Returns/ Volatility or Gain to Pain ratio), we are at roughly double the rate of all others.

This performance comes out of not any single human being's brain waves but through a consistent, replicable Human plus Machine system which is what we use for all our products. We have a blended investment strategy which is designed taking into consideration multiple factors like Value, Growth, Price Movement, Valuation, Quality of Stock, Overall Market Dynamics, etc. Essentially, it is a bias-free approach to investing. Our Model is purely clinical. It doesn't storify investing.

Our strategy is one of taking a large number of small bets as opposed to the conventional strategy of taking a small number of large bets. As a result of this diversification, we have found that one can generate tons of alpha (extra return) without adding proportionately to risk.

Avoidance of big losses is absolutely central to our investment process and Risk Management is the God we worship. This includes not just strict stop losses but also other factors like being extremely careful on market cap and liquidity norms (for example we never have a very high weightage to small caps even when they look attractive), looking at how different sectors and asset classes move together to prevent any outsized risk to any one sector or factor.

Our philosophy is to first manage the risk even before we look at the returns and the results are there for all to see.

We have an extensive techstack called FG Exotech with a series of subsystems that help us identify every attractive opportunity in the Indian market, as well as globally. The last two years have been years where more nimbleness than usual has been required and we have managed to catch most big trends.

For example we bet on the re-rating of the IT sector in India about a year and a half ago which has played out beautifully. This is a sector that we continue to like. We have also invested in commodities, specially metals and power but lightened up on these a few months ago. Capital goods has also being a good performer for us.

In 2022, many macro factors will remain important including a possible depreciation of the Rupee which makes exports/ import substitution sectors more attractive. Interest rate changes will need to be watched carefully both in India and globally.

Our philosophy is be neither Bullish nor Bearish but to remain Hare-ish. To be alert like a Hare will 360 degree vision, to move fast but to be able to change direction as well.

(A version of this article first appeared in AifPMS publication)

From the desk of Devina Mehra

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