Makes Strong Case for a Boutique PMS
Investors usually give more importance to the size of institution and company’s history while investing as this gives them comfort for their money being in safe hands. However, the most important aspect is the selection of the “Portfolio Manager”. So, investors must perform due diligence when selecting a portfolio manager. Qualification, Experience, Accolades, Philosophy, and Performance track record are the 5 key points to be considered while making this selection.
There is a belief that asset managers do not get better with size. In fact, at times, large firms become a victim of their own success. Once the assets start to balloon, making successful investment decision becomes much harder. The fund no longer can make money out of smaller companies because the large size of the fund means that it can now only invest in larger companies. So, Boutique firms could be equally competent, or in fact better the results as passion and flexibility to perform is obviously more when size is small. But the right selection is very critical.
“Boutique” refers to a small financial firm that provides specialized services within a particular market segment. These firms are built on the passionate belief that they can deliver solid and consistent risk-adjusted performance over time by employing well-defined and repeatable investment processes. As more investors demand sophisticated equity investments for alpha generation, new Boutique PMS firms are emerging and this space is growing rapidly.
Here, we are covering 5 most promising financial boutique firms that offer Promising Portfolio Management Schemes, given their Ideology, Passion, and Expertise.
1. ALFAccurate Advisors
It was started by Mr. Rajesh Kothari, an ex-Fund Manager of DSP Investment Managers (previously known as DSP Merrill Lynch Fund Managers) with over 2 decades of experience. Mr. Rajesh Kothari won CRISIL Mutual Fund of the Year Award in 2006 for DSP Merrill Lynch Equity Fund He has also been recognized and awarded for delivering unparalleled risk-adjusted returns. He founded ALFAccurate Advisors in 2009 and has been managing his PMS which is giving a stellar return of more than 20% YOY compounded annually.
Investment Philosophy – Protect Capital | Create Wealth
“Tough situations need tougher solutions”. That’s the underlying philosophy for the AAA portfolio. Given the dynamic business ecosystem, the approach to robust and proactive rather than reactive. An integrated, long-term and analysis-based approach is applied to every client portfolio. Every AAA advisor dedicatedly works towards helping the client remain ahead of the market. They say that – “Our USP is not what we do but how we do it.” Their focus is more on value research rather than commodity research. AAA advisors possess strong due diligence capabilities coupled with a unique perspective on valuations focused on the margin of safety. This Portfolio Management offering is crafted to balance the risk exposure in the portfolio and to serve your investment goals, diligently.
ALFAccurate runs one PMS strategy by the name of AAA India Opportunity Plan – Equity. The 5 Year CAGR returns for this strategy has been 21.60%* and it has been performing at the CAGR of 18.80% *since its launch.
It is led by Dr. Naresh Gupta and Raman Nagpal, both from key leadership positions of Adobe Systems. Both have more than 2 decades of experience. AccuraCap started as a family office, but given the outperformance, it generated via its different investment strategies, it started managing third-party funds as well. Dr. Naresh Gupta is a Gold medalist from IIT and Ph.D. in Computer science from the University of Maryland. He is a prolific researcher, inventor, and a senior executive running global businesses. Mr. Raman Nagpal, the founder, and CIO of the firm is an MBA, a CFA and also a certified Corporate Director from Insead Business School.
Investment Philosophy – When Technique is Perfected, Results are Effortless
Their Investment philosophy comprises of high-quality business with “moat around their business model”. AccuraCap has evolved a unique ranking algorithm that conducts extensive “Spatio-temporal” analysis of every business in its investment universe, by comparing it against every other business over space and time. This helps to narrow down the list to some very high-quality businesses. Next, using the very unique “Pendulum Hypothesis”, they buy these businesses at reasonable “reasonable valuation”. And then formulate equi-weight portfolios of such businesses.
The key strategy is to hold on to winning ideas and weed out losers at regular intervals based on the concept of spatial-temporal analysis (i.e. assessment of business relative to its rank within the sector, across sectors both the current point in time and over historical periods as well) with very limited scope envisaged for manual intervention.
The 2 prominent strategies of investments of AccuraCap are Alpha10 (large cap oriented) and Pico Power (Small cap oriented). Alpha10 which is large cap PMS has given a CAGR returns of 17.40%* over the last 5 Years whereas Pico Power which is small cap has given a CAGR return of 22.10% *for 5 Years.
AccuraCap has 2 more investment strategies which are AlphaGen (Multi-Cap oriented) and Dynamo (Small Cap oriented). AccuraCap doesn’t accept subscription in its AlphaGen strategy, whereas Dynamo is a recently started strategy which doesn’t have a track record.
3. 2Point2 Capital
It is led by Mr. Amit Mantri and Savi Jain, majorly experienced in private equity and hedge fund industry. Savi has more than 9 years of experience. He was a Director at Tano Capital, a private equity firm managing around $210 mn of assets. He has evaluated more than 500 investments in diverse industries. Amit holds more than 8 years of experience across private equity and public markets. He was previously associated as Vice President with Hornbill Capital, a Mumbai based Hedge Fund co-sponsored by Orchid Asia which manages the US $3 bn of equity capital for Asia.
Investment Philosophy – Buying the security at discount to its intrinsic value
Their Investment philosophy takes into account the competitive moat of the business, its margin of safety and the corporate governance of the company. Companies with higher moat inherent cost advantages and demonstrate high capital efficiency and typically are cash positive. They seek to maintain valuation discipline by investing at discount to an intrinsic value resulting in a margin of safety.
2Point2 capital run one strategy which is Long Term Value fund. It’s a 30-month old strategy which has delivered benchmark-beating returns since its inception. The fund has given a performance of 18.40%* on a CAGR basis since its inception and has outperformed the benchmark by 7.60%.*
4. Marcellus Investment Managers
It is led by Mr. Saurabh Mukherjea, this has been a very recently launched PMS strategy. Saurabh is the former CEO of Ambit Capital and played a very significant role in Ambit’s rise. Saurabh is a CFA charter holder with a BSc in Economics (with First Class Honors) from the London School of Economics. He also has an MSc in Economics (with distinction in Macroeconomics & Microeconomics) from the same institution. Saurabh has written three bestselling books: Gurus of Chaos (2014), The Unusual Billionaires (2016) and “Coffee Can Investing: The low-risk route to stupendous returns” (2018).
In 2018, upon SEBI’s invitation, Saurabh joined SEBI’s Asset Management Advisory Committee. The PMS strategy is being managed by Mr. Rakshit Ranjan, CIO of Marcellus. Rakshit previously led Ambit Capital’s consumer research franchise which got voted as No.1 for Discretionary Consumer and within top-3 for Consumer Staples in 2015 and 2016. He launched Ambit’s Coffee Can PMS in Mar’17 and managed it till Dec’18. Rakshit has a B. Tech from IIT (Delhi) and is a CFA charter holder.
Investment Philosophy – Based on the philosophy of Coffee CAN Investing
The intent is to build a portfolio of 10-20 stocks that deliver healthy compounded earnings growth over long periods of time. Such a portfolio is monitored for sustainability of moats on a continuous basis through extensive primary research. Repeating the filters annually helps keep the investible universe updated and also such a universe is continuously researched for developing or strengthening of moats to augment the portfolio. This filter-based portfolio delivers returns of 20-30% p.a. and 8-12% outperformance relative to the Sensex. The volatility of returns of such portfolios, for holding periods longer than 3 years, is similar to that of a Government Bond.
The team at Marcellus carries a brilliant historic performance track record. They have delivered great returns while managing their previous strategy – Coffee Can at Ambit capital. They recently launched Marcellus in Dec 2018 and so far, it has performed almost at par to its benchmark.
Mr. Pankaj Murarka is the founder and CIO at Renaissance Investment Managers. He drives the overall investment process. He has over 21 years of experience in Equity Research & Fund Management with a credible track record of performance over his professional career. Pankaj was previously associated with Axis Mutual Fund as CIO. He was the part of the team that had set up Axis Mutual Fund in 2009. He was also recognized by Outlook Money as a Leading Fund Manager with 5 years of track record of consistent performance in the year 2015.
Investment Philosophy – Sustainable, Quality growth at a reasonable price
Their focus is to invest in Good Quality business that can deliver Sustainable Growth over the medium term to long term. Their stock picking strategy is a bottom-up approach and primarily invests in growth companies who go on to become large caps or mega caps over a period of time. They tend to overlook the short-term volatility in stock prices and focus on the underlying value of the business.
Renaissance has 2 PMS strategies:
– India Opportunities (a multi cap-oriented strategy)
– Midcap (a mid and small-cap-oriented strategy).
Both of these strategies were launched in Jan 2018. Since 2018 has been the year of correction in many stocks. The mid-cap strategy has delivered -7%* returns in last one year and -12% since its inception, whereas the India Opportunities strategy is up by almost 1.9%* in last one year and -1.7%* since its inception.
* Disclaimer: – Returns data is as of 28th Feb, 2019. Has been captured from the product fact sheets. Equity Investments are subject to market risks. Past Performance is not indicative of future returns.