All FAQs

Both Mutual Fund and PMS are important for an investor. PMS uses a different approach of investing as compared to a Mutual Fund. An investor can allocate to PMS a certain portion of his investible surplus that he usually allocates to equities. PMS is neither superior nor inferior compared to mutual funds. PMS is a complementary product. It manages money in a way that a mutual fund (especially an open-ended fund) would find difficult to do.

The following investors are eligible to invest in the “Core Equity Portfolio" 1) Individuals – Resident and Non Resident Indians (after opening a PIS account as required under RBI guidelines). 2) Hindu Undivided Families (HUF). 3) Corporate Entities – Private Limited, Public Limited, Partnership firms, etc. 4) Any other eligible investor holding a valid PAN and Aadhar and who has not been barred from investing in equity markets either by the regulator OR by the Government of India. The Portfolio sees an investment opportunity by having a different time horizon to investing. We see opportunities in good businesses when they are in the midst of temporary difficulties. Our proposition is to buy good businesses which are being ignored by the market due to some difficulties, and to hold them till they become popular again. On the other hand, if such opportunities arises in a poor business, we are not interested in exploiting it.

The Core Equity Portfolio does not have any capitalization bias. The benchmark for the portfolio is the NIFTY 50 TRI.

The investment process consists of: 1) Screening all possible choices to create an investment universe of acceptable quality. 2) A track record of at least 15 years. 3) Consistency in generating a 20% or higher return on capital employed. 4) Consistency in generating positive free cash flows. 5)A minimum acceptable level of revenues of 400 crores. Further filter the universe on the basis of growth prospects and management quality 1)The ability of the company to grow its sales and profits over the next 3-5 years. 2)The ability of the company to do this without consistently resorting to additional external funding. 3)The track record of management in capital allocation decisions, and in treating minority shareholders fairly Construct the portfolio using filters of valuation levels 1) The valuation at the time of entry into the portfolio is lower than its average valuation for the previous decade and / or. 2) The valuation is lower than the expected growth rate in earnings over the foreseeable future. 3) At least 75% of all client portfolios will be from the investment universe

The portfolio manager will construct the portfolio in about 4 – 6 weeks. The portfolio has two options: 1) Regular (with a universe of 20-25 stocks. 2) Concentrated (with a universe of 10-15 stocks) Presently, no stock will have an individual exposure of more than 10% at the time of purchase. The maximum single sector exposure will be 30%. However, the Portfolio Manager reserves the right to review and amend these internal restrictions from time to time.

Cash is used as a temporary parking space until we find an attractive-enough opportunity in equity. We do not pre-decide the extent of cash. If we find an opportunity tomorrow, the cash position will come down. This is irrespective of the level of the Index.

This is a very difficult question to answer. Too many variables are at work in the stock market for us to come to any conclusions about the returns expected. Also, the portfolio may not closely stick to the benchmark index, and hence the portfolio returns will be at a variance to the benchmark returns. That said, it can be said that a well-managed PMS and a well-managed mutual fund would aim to beat the benchmark index over a period of time.