In our fund management model, machine learning systems typically select between 80-100 stocks from an overall Universe of around 600 +700 stocks.
From this list of the best possible combination of factors that go into making a list of strongly outperforming stocks, we select between 40 and 70 stocks.
Based on extensive data analysis conducted over decades of data in India and globally, this unique model of investing results in a well- chosen basket of largely un-correlated picks.
The result of this is that we get a basket that outperforms strongly over a period of time, yet with low volatility.
By having several uncorrelated streams of returns we are able to build portfolios that generate alpha without the typical beta of concentrated portfolios. That is the beauty of our model.
Almost everybody else follows the exact opposite strategy of very concentrated bags which results in very highly volatile results with massive drawdown periods as was witnessed in March 2020.
Moreover, it is only through holding securities that have very low correlations across them, that true diversification is achieved. And that results in higher than market returns, with lower than market volatility and that is what is truly valuable.
Our approach to Investing is a unique combinatorial Human+ Machine Model as against the traditional Human only model and this sets us apart from the others in the Asset management industry.
At First Global, we have married extreme Big Data Science, Artificial Intelligence with our 30+ years of analyzing global wealth making processes.
With vast computing power, we comb mountains of financial data, annual reports, quarterly and annual numbers across decades, ratios, conference call transcripts, press coverage, social media chatter, macroeconomic data, quantitative sentiment indicators, etc.
There are more than 280 factors that are used in our Artificial Intelligence and Machine Learning Model. These include Natural Language Processing factors like Analyst calls, annual reports commentary, and several other aspects.
Hundreds of ratios and variations of ratios are tested continuously to find the best combination of Return, valuation, margin, growth acceleration, and several others for each particular market.
Further factors are added as our data science lab constantly tests new factors.
All these factors are then combined into a Machine Learning Model which throws up a list of stocks and assets every quarter. The use of AI+ML give us edge in analyzing a large universe of 21,000 exchange traded securities that meet our minimum market cap and liquidity criteria.
Hence, much of the heavy lifting work is done by our AI+ML model, to which there is a human overlay led by our Investment Strategy Team cherry picking the best of best available choices in any Market.
We do offer customized plans for our Segregated managed accounts where the minimum investment amount is $1 mn. These plans or portfolios are again designed using FG ExoTech, our proprietary Human + Machine driven quantitative investment model that analyses and selects from a universe of 21,000 exchange traded securities that meet minimum market cap and liquidity criteria.
All research on investments shows that 85 to 90% of the returns of a portfolio come from Asset Allocation. The key to successful investing is to have a presence in every Asset Class – because at any point in time, some Asset Class is going to be in a Bull Market (for example, Technology in 1998, Emerging Markets in 2004-07, Commodities in 2003-08, US equities – Tech 2010 onwards, Japan in 2013-15, Global Fixed Income in 2009 onwards), and some will be in a Bear Market.
Most Investors in India suffer from poor Asset Allocation decisions because there is no single product that gives investors dynamic Asset Allocation: somebody sells them Equity, somebody sells Debt, some recommend Gold – these choices are bewildering and, more often than not, the wrong choices get made by Investors.
If you invest only in Indian (or your home country) equities, SCCARs (Single Country, Single Currency, Single Asset Risks) is the risk you are taking and various crises during the world history have shown that this can deal a mortal blow to your portfolio. For example during the Asian crisis of the late 90s Asian market crashed 50 to 90% and investors who were exposed only to home markets faced complete disaster.
All Indian investors face this massive risk of SCCARs (Single Country, Single Currency, Single Asset Risks). Consequently, Indian Investors with no diversification over Global Multi-Asset Allocation Products. suffer poor, suboptimal returns, as the tables below show:
Compound Annual Return | Last 10 years |
Sensex Index (USD) | 8.5% |
MSCI WORLD | 18.8% |
S&P 500 | 25.3% |
NASDAQ Composite | 22.9% |
NASDAQ | 23.1% |
And this is after a massive run up from the March 2020 lows. In the decade prior to that, the Indian market gave only 1-2% annualized USD returns!
Through First Global’s top-down Global Asset Allocation Single Window-All Weather (SWAW) Investment Products, an Investor gains exposure across all major asset classes across the world, and the weighting of each Asset Class is changed to suit the view on that Asset class.
A Multi Asset Class, Single Window approach ensures that an investor always has exposure to one Bull Market or another irrespective of where (and in which asset class) they happen in the world. This is because Asset Classes move in an uncorrelated manner: having dynamic exposure across all Asset Classes ensures an investor can gain far better risk-adjusted returns.
Moreover, for Indian investors, who are still comfortable only with India, we have an Indian Multi-Asset Allocation PMS, which has diversified investments across various Indian asset classes: Equity, Fixed income, Commodities, Precious metals etc. This Multi-Asset portfolio ensures steady, consistent, strong, low volatile returns. The volatility of our Multi-Asset PMS is just 10% compared to 25% for the market. Hence, through a Multi-Asset portfolio one gets, steady, strong risk-adjusted returns, which is very essential in the prevailing volatile market conditions.
Our portfolio is highly diversified across sectors and stocks because lack of diversification in one’s investment portfolio can truly leave one SCCARd. For an investment portfolio to be able to withstand any kind of market conditions, it is important to avoid SCCARs: Single Country, Single Currency, Single Asset Risks.
When we look at diversification, we do not consider just the number of holdings, but also the correlation across the different holdings.
A portfolio with 30 stocks might have very little diversification if all the holdings are from similar sectors, as is the case with many PMS schemes on offer. If all the holdings are from 1 or 2 sectors, in reality such a portfolio has just 1-2 large bets and is not diversified at all.
We ensure that we have true diversification in our portfolio. Correlations across our various holdings are very closely monitored. We have very strict limits on stock level as well as sector level weightages in our portfolio.
Also, we do not rely on the traditional method of measuring sectoral risk where each stock is exclusively categorized into a particular sector or industry. Stocks can have non-zero sensitivities to multiple sectors. Our unsupervised clustering algorithms identify such sensitivities and give us a truer picture of actual sectoral allocation.
Thus, our models help us in creating multiple uncorrelated streams of returns, such that something reduces risk, and something always gives you returns. Therefore, one can actually decrease risk and increase return, with diversification, as long as one constructs the portfolio properly.
The idea that diversification sacrifices performance is a myth peddled by fund managers who do not have the capability of providing dynamic and tactical diversification, across geographies and asset classes. Or even within a single market (e.g., market).
Also, data shows that in any Market period spanning one year or more, anything between 40 to 60% of the Securities in a market beat the market.
For example, if you take India Nifty 500, and analyze the data over 10 15 20 years, every year anything between 250 to 350 stocks beats the market.
On a global basis exactly the same percentages play out.
What this tells you is something extremely important: That as long as one has built systems to choose properly from the outperforming part of the market, and can easily beat the market without sacrificing any returns and in fact, one can beat the market with far lower volatility.
Therefore if you take the example of the entire world, out of 20,000 securities that we analyze, roughly 8 to 11,000 will beat the market every year. From that we pick a very small fraction: between 0.5 to 1%!
It is actually a very carefully crafted selection of the best of the best available choices in any Market. That is not a very wide selection by any standards! Hence, Diversification does not mean lower returns, rather diversification leads to a far higher quality of returns, i.e., returns with lower volatility.
And the results are there for all to see. Our risk-adjusted returns on any parameter, Returns/ Volatility, Gain to Pain etc are the best in class – roughly double the value of the next best.
In case you need further information or clarification at all, just email us back on this email ID and we will respond real quick.
We look forward to building substantial long term wealth for you and your esteemed clients by being partners in your wealth creation journey.
(A version of this article first appeared in AIF & PMS Experts India Pvt. Ltd.)
From the desk of 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 as your wealth advisor, super quick!
Or WhatsApp us on +91 88501 69753
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Einstein taught us about relativity in nature. Now come Devina Mehra and Shankar Sharma of First Global to teach us about relativity in financial markets -- and raise some serious questions about just what is driving stock prices.
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Personality counts: Walmart's frugal, but Target charms
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Dead Batteries
At 11 times trailing earnings, Energizer is cheaper; Gillette's multiple is 25. But cheaper doesn't mean better, says First Global.
Bipinchandra Dugam @bipinchandra90
@devinamehra @firtglobalsec
invested in both GFF-GTS and Super I50. Thank you very much for such wonderful investing experience with completely new approach. In my 15years of investing first product I felt which close to what customer want.
Shishir Kapadia @shishirkapadia1
@firstglobalsec @devinamehra
by far you are the best, I have not come across transparency, acumen, global expertise, exposure, protection of capital, delivering return from any fund/ fund managers. Invested very small size in 3 products will keep on increasing it over the period
Piyush Bhargava @PiyushB88762654
@devinamehra @firstglobalsec
Thanks you team FG specially Devina, my investment doubled in less than 3 years in SDPB As a investors & PMS distributor of your product looking to have a long-term relationship with the company.
@KarmathNaveen the person with whom I always interact
Sumeet Goel @GoelSumeet
Very happy & relaxed to be invested with first global pms
Shishir Kapadia@shishirkapadia1
Congratulations on super performance, above all transparency and systematic process are unmatchable.
One must opt this, if person consider him/her self as an investor. Very happy to be part of this since invested. FG has managed worst year (ie 2022) so efficiently and skillfully.
SY @SachinY95185924
With so much of volatility in the market, risk management is very important part & considering that FG is doing awesome work!!! Kudos to you Chief
Amit Shukla @amitTalksHere
Truly outstanding. As a retail subscriber to #fghum #smallcase, I can vouch for the Nifty beating returns (8% vs 3%) in last 1 year. Keep up the awesome work @firstglobalsec
We can load above testimonials on site as a scroller, and just below that we can add a section for compliments . Below tweets are comments and praises are related to our content, performance and some our direct compliments to you.
ADIT PATEL @ADITPAT11226924
Good team...
Special mention @KarmathNaveen .. he is soo helpful anytime of the day or night..
Hindustani @highmettle
Bought Peace with FG-Hum.Moving all funds from DIY investing to well managed and diversified PF at low cost.
It has doubled almost, excellent pick.Every small investor must invest in her FG-HUM Smallcase.
Suresh Nair @Suresh_Nair_23
I have 8 small cases and your has been the most rewarding ones .. thank you Devina.
Sayed Masood @SayedM375
There is absolutely no doubt that she is one of the best investors of India in modern times but more importantly, she shares the most sincere and sane advice with retail investors.
SY @SachinY95185924
Wow Superb Returns🔥 Congratulations Chief for being Number 1 among all PMS!!!
You are one of the sharpest mind in Global Stock Market
AnupamM @moitraanupam
Congratulations Devina, results talk in itself!
Abhishek @simplyabhi21
Congratulations ma’am @devinamehra ! The consistency you have in maintaining the top rank position is outstanding! 👏
Mihir Shah @Mihir41Shah
We are learning More about markets (& Life ) thanks to U than we learnt in our Professional courses.A BIg Thank You, Wish all get Teachers Like You!!
Sumit Sharma @MediaSumit
"The ability to be comfortable with being outside consensus is a superpower in investing...and in life." Devina ji hits the nail on its head!
Majid Ahamed @MajidAhamed1
Congratulations @devinamehra mam! All the best for long term returns as well.
Vinay Kumar @VinayKu05949123
This is the wonderful session I have ever attended till date. One of the most fruitful hour of my life. Devina madam, ur clarity on financial mkts is simply superb.The way u portray the facts supported by "data" about stock mkts is really astonishing.I will listen again.Thanks.
VIJAY @drippingashes
I loved to read your journey, insight and philosophy. It's a pleasure to read and know of your takes on market and life.
MNC🏹 @Focus_SME
Check & follow @devinamehra's timeline for lots of post debunking such rosy stories. Also, she gives amazing 🤩 sector directions/hints.
KLN Murthy @KLNMurthy2016
Good actionable insights, great article!
Suresh Nair @gkumarsuresh
Devina Madam is simply terrific... good knowledge, straight and simple thinking.
Very difficult to emulate such traits. I listen her past interviews from youtube.
Respect...!!!!
DD @AliensDelight
One of the brightest minds in the world of finance :)
Radhakrishnan Chonat @RCxNair
📣 Calling all investors! Just had an incredible interview with @devinamehra, Chairperson and MD of First Global. We discussed the importance of global diversification, effective asset allocation, and the risks of sitting on the sidelines. Trust me, you don't want to miss this!
siddarthmohta @siddarthmohta
Excellent performance. Flexibility is the key as you have mentioned it earlier also. Cannot have finite rules for infinite mkt opportunities.
Boom (বুম)@Booombaastic
To be honest, the insights which Devina madam brings in is very enriching..have learnt a lot from them...
Himanssh Kukreja @Himansh02428907
One of the most accurate analysts :)
I always look forward to you interviews mam
Abhijeet Deshpande @AbhijeetD2018
Madam, It is always a treat to read your insight, not only on business but on other topics also!!
Dada.AI @dada_on_twit
Thanks for this wisdom ma'am. Always love hearing your thoughts on everything equity. :-)
adil @zinndadil
Excellent points!
Can clearly feel this thread is a product of marination of many books and years of experience. 👍
Kamal thakur @Kamalgt10
Superb !!
Your knowledge, analysis & articulation is simply great 👍
Tanay @Tanay36232730
Follower on Twitter and Subsciber on YouTube of First Global, really helping me in my investment desicion. Thanks
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