We believe in investing heavily in resources to support our detail oriented approach. Our Fund Manager and Advisor to the Fund together bring complementary but rich and relevant experience spanning over two decades each, and have had a track record of excellence in equity research and portfolio management respectively. Because of their prior education and experience in technology sector, they are very comfortable understanding complex industry dynamics that may shape the future of companies available for investment.
We focus on process driven investing and have developed proprietary analytical models and methods which we follow rigorously to identify companies with superior risk-reward characteristics. A comprehensive set of rules guide us in our investment process and arguably reduce individual biases and mistakes.
We pursue an absolute return strategy and invest in equities with a long term (three year plus) horizon but do not restrict ourselves to any specific holding period. We experienced one of the fastest first year ramps in the industry and already have equity assets under management exceeding Rs. 280 crore (USD 45mn). We count some very prominent and globally recognizable names as our valuable clients. We have an additional advantage of being able to invest also in small and midsize companies that are outside the radar of many large investors but offer opportunity for high returns because of both growth in earnings as well as valuation. We do not follow model portfolio approach prevalent among our peers and instead structure portfolios based on merits of fresh investments at any given point in time. We have been able to deliver strong absolute and relative performance without taking full market exposure. Most importantly, we believe in earning from performance and our unique fee structure (Industry’s lowest fixed fees for management) is designed in accordance with that principle.
Fund Objective and Strategy
- Provide superior long term returns while protecting against permanent loss of capital using Long biased strategy:
- Invest in long-term growth opportunities in Indian companies across market capitalization (with greater emphasis on mid and small cap companies that are not fully discovered) that have superior business model, sufficiently large market opportunity to deliver growth, strong and shareholder focused management and are available at price that would result in sufficiently attractive risk adjusted returns over a horizon of at least two years
- Have an option of investing in Index Futures in order to partially hedge the portfolio
- Manage market exposure by modulating cash position in the portfolio depending on the opportunity set and attractiveness of investment ideas and through the use of index futures and options
- Follow rigorous fundamental research-driven and rule based investment process that is disciplined and yet leaves enough room for creativity and ingenuity; Investment process entails interactions with the companies through common as well as uncommon means, detailed financial model on the company as well as the industry to properly size up the growth opportunity, completion of a detailed check-list and review of investment argument by the entire research team
- Unlike many peers, Sameeksha does not follow model portfolio approach as it nullifies the key advantage offered by PMS rules. For any new investor, we invest in companies from our existing portfolio only if it merits fresh investment in a given company at prevailing market price.
- Focus on long-term return and hence may experience short term volatility, but will use its research capability to minimize the permanent loss of capital and will adhere to established risk guidelines
Right set of skills, values, opportunity and approach
- India is in the early stages of cyclical upturn and healthy growth is likely to continue for long-term. With a young and growing population, the Indian economy will enjoy strong growth for a longer horizon than many other large economies of the world.
- Penetration levels and consumption per capita levels of a vast range of products and services suggest a long period ahead of high single digit to double digit growth. This creates numerous opportunities to invest in established as well as emerging companies.
- India is not one market but many markets: Urban versus Rural, Bottom of the pyramid all the way to the super luxury. As such, Indian economy is already large to offer sizable growth opportunity for a whole range of goods and services covering the entire spectrum of luxury to bare necessity.
- Government is in full throttle mode to revive manufacturing in India. India possesses competitive advantage to achieve this. Availability of cheap abundant labour allows manufacturing-oriented companies to create competitive advantage and gain share in the global market.
- Indian Paradox: Though India has been a difficult place to do business, there is a strong entrepreneurship culture that leads to formation and scaling up of some great companies. These companies erect competitive barriers and earn high returns on capital.
- India has been a good market to invest in equities and will remain so due to vibrant startup eco system and large domestic market post.
- Experience: Fund manager with over 20 years of experience in equity markets and five years in technology industry having worked as Microprocessor designer for world’s most renowned processor design team, global technology sector head at JP Morgan, as India equity strategist and India Fund manager. Benefit of additional ongoing input to the investment process and strategy by a professional with very relevant experience and a full strength research team on the ground in India. Background in technology has programmed us to be on lookout for disruptions that can fundamentally change any industry.
- Ability to identify and access relatively undiscovered companies: Have been following a strategy of reaching out to companies relatively unknown to market for last eight years. Have identified more than three dozen stocks that delivered many fold returns over this period. In many cases, there was absolutely no sell side research on such companies.
- Being able to reach out to top management: We have experience of dealing with management of companies as small as $50 mn market cap to $100 mn market cap. We were first call for some of biggest tech companies in Asia (TSMC, Infosys) when they sought market input. As such, business owners and CEOs talk to us because we have reputation in the market and we add value by providing insights to the company on issues ranging from financing options to capital allocation to dividend policy and other topics. Such meetings prove very valuable in our decision making. In the process, we are also able to source liquidity at times.
- Roll-up the sleeves approach to access and understand businesses: We put our on-the-ground presence to smart use and spare no effort even if it means travelling to remote corners of the country with no air connection. We meet companies in a situation that most of our peers would consider either inefficient or below their status. We have access to niche corporate access events where we have met companies that are otherwise not attending such events. Some great investment ideas have been identified by us through such unconventional methods.
- Proprietary tools and process driven approach: We bring engineering mindset to equity research and have developed several proprietary tools to aid our process driven approach to both enable us to identify ideas as well as ensure consistency and improve efficiency in our decision making. Our set of tools include detailed standardized Financial Model template embedded with unique dynamic DCF/EROE to allow us to quickly build high quality financial models through which we can fully understand value of every stock analysed and we already have a repertoire of models and notes on more than 200 companies. Our Qualitative checklist covers almost every possible aspect of equity analysis ensuring that we cover all bases.
- Track Record: We have delivered good risk adjusted performance till date.
- Investment Discipline: Sameeksha Capital employs a proprietary multi-layered stock selection checklist to filter through a legion of stock ideas. Process based stock selection helps get rid of any personal bias. Own ‘Value Versus Quality Matrix’ analysis for each investable idea with a high bar for quality, helps instill discipline into Buy/Hold/Sell Decisions
- Qualitative and Quantitative Analysis: Detailed standardized Financial Model template embedded with unique dynamic DCF allows Sameeksha Capital’s research team to quickly build high quality financial models on the company and industry and enables them to fully understand value of every stock analysed.
- Alignment of interests of clients with ours: We believe in earning primarily from performance. The fund charges among the lowest fixed management fees in the industry. The employee incentives are totally dependent on the Fund’s ability to generate value for our clients. Though not required, Sameeksha Capital uses custodian to add additional layer of protection for its investors. Bhavin shah, the fund manager directs equity investments by his family exceeding Rs. 30 crore ($4mn) through Sameeksha Funds.
- Transparent dealing, no hidden markups: We not only charge low fixed fees but also negotiate heavily with third party service providers to keep expenses charged to clients as low as possible. Unlike some well known names, we do not aim to make any money from client other than what is clearly stated as our fees.
- Unlike many of our peers, we measure our performance only above value of investment compounded at hurdle rate: Investors pay fees only on returns above the value computed by compounding the hurdle rate. As such, our fees could be significantly lower than many of our peers
- India: Multiple market across the value spectrum
- The Indian Paradox: Adverse business conditions allow successful companies to erect competitive barriers
- Make in India pushes the government to do the right thing
- Indian equities have delivered superior returns in INR as well as USD
- Shift from high inflation-low growth to low inflation-healthy growth
- Target Zone: We catch them Young when they are yet to be noticed by others
- Investment Framework validates across entire market spectrum