Best Portfolio Management Schemes in India

I believe I’ve filtered through all the good Portfolio Management Schemes in India as of August 2016 mid-2018, at least all those that have a value focus. If you think I have missed any, do please let me know in the comments below & I will be happy to study it. [See section below “Why XYZ PMS is not on this page]

An investment in a good mutual fund or PMS ought to be thought of as a generational investment, i.e something you do not ever touch (except add or pour excess savings into) and pass on to your children. Constant tinkering, grass-hopping and chasing returns is

Too much info is a bad thing, so I’m only including the top few here below.  Let’s say you are ready to set aside funds for the long haul, what are your (best) options?

SIMPL (Ravi Purohit), Vallum (Manish Bhandari), Equity Intelligence (Porinju Veliyath), Motilal Oswal (Manish Sonthalia), and SageOne (Samit Vartak). Please do not extrapolate these past returns into the future.

Please see the below section on managing your return expectations.

* There is a second table on these Funds under a Volatility header, toward the end of this page.

How to Manage your Return Expectations

This section is actually an excerpt from a longer post “How to Manage your Return Expectations” but I’ve inserted it here because it may simply never be read, and ought to be read immediately after any  tabulation of impressive returns.

Chasing returns is fraught with danger. We tend to chase because by nature we extrapolate time series. What happened in the past “must” happen in the future, or so we hope. Because a particular person/fund/manager had their portfolio return a certain rate over 2-3-5 years, we expect our very enrollment in that fund should start, the very next month, the “inevitable” time series that the past numbers implicitly “promised”.

Past returns are helpful to understand why some manager(s) may have had a) excellent security selection (the “right” businesses, at the right/bargain prices), b) the right proportions (having 1% of their fund go up 3x does not move the needle), and c) the role of luck. Any honest / self-critical fund manager will admit the help of the final ingredient.

Past returns tell us that the building blocks for relative out-performance exist with that fund manager.

Long periods of out-performance may well be followed by periods of underperformance. Some of the best value investors in the world exhibit this pattern. It is worth asking yourself – are you mentally prepared to stay calm & do nothing especially during the (inevitable) periods of underperformance? or have you created in your mind the (unrealistic) expectation that your fund manager(s) can never underperform & should consistently and always be outperforming a) the relevant benchmark & b) every other fund manager you know?

So when we invest with a fund, the first thing we should be doing is setting very realistic return expectations for ourselves – over a long period of time (ideally 5-10+ years). This is crucial to avoid a) disappointment & b) shopping behavior (my fund only returned X%, I know of a fund which did X+Y% – I should therefore switch)

Developing conviction in the wisdom & abilities of your fund manager(s), before you invest – is essential.

That said, what are “realistic return expectations”?

If I invest in one of the PMS services I respect, I would expect some outperformance relative to mutual funds & would set my bar at 20% p.a.

{remaining sections removed; full article is here here}

When in doubt, stay conservative. Between longevity of reasonable returns and potentially high returns which may fizzle or worse, hurt –  we are always better off with the former.

Here’s a brief review of the 5 PMS offerings below.


Securities Investment Mgmt Pvt Ltd (SIMPL)

The fund has a simplistic website with only the bare essentials on it – the PMS disclosure doc and their presentation.

The founder of SIMPL is Rajshekhar Iyer, ex-head of Equity research at KOTAK. He pioneered a value investing newsletter in India in the 90s, and is highly influenced by Graham & Dodd. Mr. Iyer managed money for friends & family for about two decades before formally establishing itself as a PMS (which was in late 2009). It is currently run by Ravi Purohit. I came to know about the fund because I follow Sanjay Bakshi, one of the leading lights of value investing in India, and a few years ago Prof. Bakshi invited Ravi to share the stage with him presenting a case study of an incredible footwear company to his MBA students. Interestingly, Prof. Bakshi also wrote articles for Mr. Iyer’s newsletter back in the day.

Ravi has ~90% of his networth invested in the fund, and of the 268+ crores (figure likely to now be dated) being managed by SIMPL, about 30% is from the Iyer family; the disclosure doc would have the exact figures).  The point is – alignment of interests, a common theme you will find across these PMS offerings. This is a very skilled, conservative (Seth Klarman-inspired) PMS option.


Vallum Capital

This is the best-performing PMS in India in the ~4.5Y window from Oct’11 through Mar’16. It is the “youngest” PMS of the four I’ve shortlisted, but likely the easiest to get comfortable with because Manish makes his thought-process open to the public on his blog “Valuenomics“. He frequently shares what he’s reading, and has even posted his fund’s annual letters online. If you are considering them, it may be worthwhile reading through them all.

There’s an interview of Manish Bhandari on Youtube. Transcript.

I’ve read all the posts on his fund’s blog, and they make for very interesting reads. His piece on real estate “The End game of speculation in Indian Real estate have begun” (August 2013) is one of the most solidly researched & elegantly laid-out arguments on this subject I’ve read.

Vallum is primarily a mid-cap focused PMS, with some small-cap investments as well. They tend to have half their portfolio in contrarian/business turn-around opportunities and the other half in “growth-at-a-reasonable-price”. They’ve made quite a few excellent calls over the last ~5 years which have contributed to the superior performance of their fund.

Their investment approach (as I see it) is closest to the one espoused by the fund managers of Marathon Asset Management [UK].

“At the heart of Marathon’s investment philosophy is the capital cycle approach to investment.  It is based on the idea that the prospect of high returns will attract excessive capital (and hence competition), and vice versa.  In addition, an assessment of how management responds to the forces of the capital cycle and how they are incentivised are critical to the investment outcome.”

Manish has the highly esteemed Sankaran Naren as a mentor and guide [always important to know / note who people look upto or have learned from] A substantial effort is made to find opportunities where one does not pay too much for growth (emphasis on contrarian opportunities & supply side mechanics). For more on this, consider reading the excellent book Capital Returns.


Equity Intelligence

Porinju Veliyath runs Equity Intelligence, based out of Kochi. He’s posted about ~32% a year since 2003 (~15 years at the time of this writing).

This is an extraordinary rate of return vs any kind of benchmark – sensex/nifty/inflation and, more – it is over a very long period, crucially, covering the 2008-9 crisis during which any fund manager could have been down between 30-60%.

He doesn’t care for moats or great management quality. He is often looking for turn-arounds, deep bargains or futuristic businesses (example : FCEL). He often “talks his book” on Twitter and TV.

One thing to note is accessibility (to the fund manager) is very low. I don’t know about MOSWL, but with the other PMS managers listed here, you can typically schedule a call with the manager and ask to understand a particular position’s thesis in detail. The same does not hold here. On the client relations front this fund is quite poor.

In 2018, the fund has gotten hammered as 1) they tend to hold no cash position, 2) invested 100% of received funds at every point in the late 2017-early 2018 cycle & 3) had a concentrated portfolio (10-12 positions) with the wrong strategy of business selection. To his credit, the fund manager has publicly acknowledged that his firm has had a bad year. One may reasonably expect though, that someone who has had a strong record over a long period of time will at some point resume the strong record. How long the recovery takes is anybody’s guess.

You can write to EQ and get their latest presentation or read about the fund and their disclosure doc.

[Update : mid-Sep’17 : min was 25L for most of 2016, was upped to 50L sometime in 2017].


Motilal Oswal – Value PMS

I’ve written about this company here. One thing I can vouch for is the company scores very high on integrity; the founders have a very long-term focus, and truly get value investing. Of course the CEO is not the fund manager of the PMS, but because it is a “flagship” product for HNW clients, I would imagine it would have considerable periodic oversight in terms of strategy and direction. Manish Sonthalia (the fund manager) isn’t on Twitter, but he’s written a lot in the past & he’s been interviewed on TV many times (see YouTube for this). Just as with Porinju’s PMS, this PMS has been around for a while and one must appreciate its excellent ~25% annual returns in the context of a 15 year period (>28x, net of fees)

Here’s an interview of Sonthalia with Mr. Damani [Oct’16]

Their site has a lot of material if you wish to consider investing with them.


SAGEONE

As part of my learning process, I followed Samit on Twitter, and read all the quarterly/annual newsletters from their site.  Samit, was also interviewed by Vishal of SafalNiveshak, who conducts probably the best interviews of investors that I’ve come across. My impression is Samit is very humble, level-headed & thoughtful.

I attended the 2017 Asia-focused Value Investing 2017 conference put together by Shai Dardashti & John Milhaljavic [who run The Manual of Ideas]. Over an hour and half, Samit presented an investment idea & Shai asked a whole lot of first-rate questions. My takeaway is that the depth of their ‘homework’ is excellent. Later that year, Samit presented the idea (Balkrishna Industries) in India at IIC 2017. Video link here. Samit also presented at IIC 2018.

If one really wants to know about their investing process, there’s plenty of good material online.

I actually had their India Growth fund on my radar since 2015. This has a $100K min, and has achieved  ~34% annualized in USD terms from Apr’09 – Feb’17. Back then, there was no way for resident Indians to invest in it. It was domiciled out of Singapore, and only HNIs who were not residents of India could invest.

SageOne launched its domestic PMS offering only in Jan ’17 & as of May ’17 upped their min investment from 50L to 2C. By Oct’17 they stopped taking new monies as they were not finding opportunities interesting enough to deploy fresh capital. They opened up their window again in May’18.

They tend to lean towards higher quality names with strong cashflow visibility. Some of these have been wealth-creators in the past 5-7 years. If you write to SageOne & ask, they’ll share with you their PMS deck which mentions some of them.

They do have a fixed-fee option, which I like. If you expect a significant outperformance, you’re better off avoiding a performance-based fee structure & choosing a flat fee structure. Currently, only SageOne & MOSWL offer this option.


 Update on ticket sizes

Motilal Oswal & Vallum had a 25L min, SIMPL & Equity Intelligence are all now 50L min, and SageOne just transitioned from 50L to 2C. Equity Intelligence is likely to upsize min to 2C at some point. There’s a steady & rising re-allocation of Indian savings into equities, a long-term secular trend that is here to stay.


On Volatility

 

 

 

 

 

The volatility column here is worth your attention if you are considering these managers. MOSWL by virtue of its composition (significant % being large-cap) will have the least volatility amongst these options. EI, because it focuses on special situations and turn-arounds, and because they invest in smaller companies, will naturally have higher volatility. SageOne, because it invests in higher quality names with strong cashflow visibility will have low volatility (but not as low as MOSWL, because the companies are typically mid-caps, not large-caps). You should anticipate in advance how bumpy your ride is going to be, and how much discomfort you are willing to be OK with.

While Volatility is not a way to measure Risk, you as a potential investor have to decide for yourself what level of volatility you can live with. If you have been invested in equities for a number of years, you would have likely had the experience of seeing painful declines. If you have not, then it is safe to assume that your stomach is still to be tested 🙂 The longer your time horizon for being invested in equities, the less relevant volatility becomes.


why xyz pms is not on this page

Note to future readers:  have received several comments, on and off this page asking why XYZ PMS is not on this page, Orr my opinion on XYZ PMS and if ‘it is good’. I’m flattered, but please do note – my intent has been to find the best PMS options which satisfy many criteria – some of which are

1) have a value approach, 2) you can find out something about the fund manager(s) either through their interviews, or writings or letters (important) 3) have at least a 5-year track record (ideally longer), 4) some sense of the alignment of interests etc.

If you feel that XYZ PMS does meet at least the above 4 criteria, and there is good reason it should be listed among the best, please let me know. (Else, ignore)

You are of course welcome to pursue any PMS that meets your own criteria; this page is not meant to advertise the above PMS options but rather to list those funds/options which met my own subjective criteria – in the hope that it may be of use to others who may have similar filters.


Of Interest

How heavily back-loaded compounding is : my note on the power of compounding.

My note on Why Equities, and why India?

Comparing FDs, Real Estate & Gold

The Purpose of Money

178 thoughts on “Best Portfolio Management Schemes in India

  1. Vikas Rana says:

    Hello SELVARAJ,

    I also been closely following Buffet, Munger, Pabrai and India Value Investing scene for last 10-12 years.
    I agree with blogger’s response. Just try to take the gist from Mohnish’s teachings..not literally, he is in different league alltogether as an investor.

    1) It is impossible to “successfully copy/execute/maintain” the ideas from PMS schemes..blogger stated some of the reasons
    2) For cloning, your/our best bet is to subscribe to services such as of Rohit Chauhan, Stalwart, Katalyst etc. You will get timely updates to understand/build/enter/exit/maintain positions/businesses..and this is easily scalable.

    This is a great thread, hope readers continue to benefit from it.

    Vikas

    Like

  2. Mani says:

    Excellent blog dear. Really you gave very clear picture of each pms in single page. View of equity intelligence and sage one is awesome

    Like

  3. Devendra Mishra says:

    Hi, since our last message exchange, I reached out to a few PMS providers likes of SageOne, Vallum, Motilal Oswal, Shepherds Hill, Alchemy, Kotak etc. Below is quick summary of my interactions and I would appreciate your thoughts/views/guidance –

    SageOne – the minimum corpus is 2Cr but they are not taking new PMS requests. Suggested some new AIF to be launched this year but no details were shared. I have called them a few times and followed up through emails, could not get much details. Their response rate is very slow and find it bit frustrating. Anyway, they were out of my reach, but the interaction was bit disappointing from a new investor perspective

    Vallum – seems like a junior guy picks up the phone, not very well versed to answer the queries and always tells to call again. Their staff sent me list of documents required (overwhelming!). After few trials, got hold of Mr. Madhusudan, who works with Mr. Manish Bhandari. Discussion went well and he asked the details of my existing portfolio. He was suppose to review the current portfolio and get back, still no response after a few follow up. Again, seems like they are too busy or dont care about new client. Vallum is still in my list simply because I am willing to be patient for 30%+ kind of return which they are claiming. Would like to have a call again to conclude the discussion and take a decision. They are accepting 25L to start with but have 12-18 months period to make it total 50L.

    Mostilal Oswal – sent me some factsheets and assigned an Associate to take details from me, not much progress except that guy atleast has a courtesy to call me back. MO’s PMS performance seems average and inline with MFs (19-24% in 1-3 years), so they are at number 2 in my list (after Vallum), althought the associate who called me seems helping and willing to arrange calls with advisors.

    Shepherds Hills – were easier to reach out, and I got a call back from them within 2 days after raising my query online on their portal. First discussion was good, but sounded little stiff with approach. Min is 25L, there is no fixed fee but high performance fee of 22% over 6% hurdle with average returns, comparable to MF, which seems bit high to me.

    Alchemy – Minimum is 50L with 1.5% fixed and 15% perf fee over 10% hurdle. Easier to reach out and talk and the aldy I initially speak with, arranged a call with an advisor who was quick to send me the factsheets, performace and fee details etc, followed by another call. Their claim to be their in the market for last 12 years investing in multi-caps and have delivered 26% CAGR.

    I am slightly confused between Vallum, Alchemy and MO. Vallum seems to have delivered higher alpha, but response is quite slow and and explanary enough to satisfaction, whereas Alchemy is more responsive but delivered 26% (which is still good) with the similar fee structure. MO are ofcourse reputed amongst all, but doesnt impress with returns (inline with their MF – MOSt select focus)

    Havent spoke to Porinju’s Equity Intelligence and will try my luck with them in a few days.

    I have one concern/question thought, particularly looking at the documentation/process required for a PMS for an NRI and limitation of only ONE PIS account, means I cant invest or split with two or more PMS, I am not very sure whether PMS is ‘really’ worth taking a pain? Why not simply invest in good MF, ETFs and a few direct stocks in markets like India, HK and US? Past couple of year’s returns are quite comparable with PMS (in the range of 25-35%), although there may be opportunity loss in long terms as PMS might be better placed to deliver higher alpha than MF.

    Appreciate your views and comments.

    Like

    • valueinvestingfundsindia says:

      Thanks Devendra for sharing all your experiences in such detail. V.helpful to others.
      I’m excluding Alchemy & Shepherd’s hill for reasons already discussed on the comment thread (maybe do a Ctrl+F to search the first 100 comments?) & SageOne, given ticket-size.

      We’re left with 3 : MOSWL, Vallum & EI.
      Re: your interaction quality.
      I’d say ignore the data point of experience with junior/mid-level employees anywhere. They are *not* the stewards of your capital, and likely have no skin in the game. [i.e they don’t actually care or likely have no consequences if they did a sloppy job in dealing with you] If you select a particular fund, do so based on their all the other subjective factors which make sense to you, and whether you like XYZ person to be (one of) your fund managers or not. Ignore the intermediaries.
      As an aside, yes I do think client-enquiries should be handled a lot more professionally, and in the ideal world, would be independent of cheque-size etc. But this part of fund management is simply not a focus for fund managers (apparently). If anything, in a bull market, depending on their opportunity set, they may simply not like to take on new clients (SageOne explicitly stopping since Nov’17). In other funds maybe this is less of an issue & there are opportunities but – to re-iterate : Ignore the intermediaries.

      Re: your other Q. Consider https://valueinvestingfundsindia.wordpress.com/differences-between-a-pms-and-a-mutual-fund/
      Yes, you can go with a MF. It is a very personal decision.

      Don’t invest directly in stocks unless you are able to read a cashflow statement & balance sheet (at the very least). Investing without proper guidance can be very risky.

      Like

    • Sameer says:

      Our position is cloned i.e. I am pretty much in the exact same scenario. Live in the middle east. I dont have the time, track record or confidence to dealing with individual stocks or even 5-8 mutual funds. I dont have the time or the inclination to go through a learning curve.

      Porinju was great to speak with. Forthright and straightforward. Also has mechanisms for an NRI to easily invest, they are institutionally used to NRIs from the ME. Sageone you have to be an accredited investor for (2M $), and have $ 100K for their India Growth fund. As an NRI you cant join their PMS, however I dont think their 2CR minimum is true. The person I spoke with said that can be discussed. Vallum I still have to follow up but procrastinating since market is at all time PE high (well almost, 2 points to go before 2008 PE peak).

      I know dont time the market and all that, but I am currently deeply uncomfortable entering the Indian equities space at current valuations. PMS cannot hold your money as cash equivalent and will deploy immediately. I have not checked the rest. Any comments, especially telling me how I am wrong, appreciated.

      Like

      • valueinvestingfundsindia says:

        Hi Sameer,
        it is very good you are not venturing on your own in equities as there’s a good chance of getting burned. 5-8 MFs assuming 50 stocks in each is 250-400 stocks, likely with good overlap –> essentially “owning the market”. 1 or 2 should suffice.
        I recently published a compendium of various contrasting views on 2018 & beyond. Thought relevant as we are in uncharted waters so no harm studying the context & environment we find ourselves in. There is no one “takeaway”, no one “final” view.
        https://valueinvestingfundsindia.wordpress.com/looking-into-2018/
        First, your valuation statement implies a) absolute peaks matter (they don’t) b) we are in an expensive environment. It could very well be that we are in a cheap environment. Investment giants like Buffett, Dalio believe equities are cheap vs bonds. The “versus” here is key, as no financial asset can be evaluated in isolation. Of course I’m not saying you *should* be comfortable – that is a call you alone will have to take.
        Just be aware that there Are other ways of looking at markets, and that global growth is accelerating. Apart form this, every market outcome in 2018 or any other year is possible, and people have diverse views.

        Like

    • s k jain says:

      Hi sir..thnx for sharing your experience, it was really helpful..would to like to share further progress and what you have selected finally. Ignoring EI gives surprise.

      Like

  4. pankaj says:

    Hi, Thanks for the nice blog giving the detailed information.

    Purely from the academic or learning perspective. Why you don’t put Basant as Value investor ? At the same time Porinju in the value investor. Most of the picks from Porinju are from the small/midcap space and are turn around stories. Also some with doubtful management companies.

    Like

    • valueinvestingfundsindia says:

      Hi Pankaj,
      Re: why Porinju is or is not a value investor, maybe worth studying his publicly available history of picks. As Howard Marks says, you can buy a great business at a poor (high) price & a poor business at a great (low) price. He’s demonstrated over a long period he has this capability. Each investor’s approach will be different (turnarounds, change in mgmt quality etc)
      Re: Maheshwari – pls do a Ctrl+F on his name in the prior comments as already discussed.

      Like

  5. Ilesh Shah says:

    Hi,

    I have Motilal Oswal PMS services under Value Strategy and India Opportunity Portfolio, both of them have not performed up to their reputation and expectations in last 6-8 months. To some extent, I am disappointed. I also discovered that my mutual fund selection performed rather well during this period.

    Should I be concerned about it or its same experience with other PMS services also?

    Thanks in advance,

    Cheers!

    ilesh

    Like

    • valueinvestingfundsindia says:

      Hi Ilesh,
      sit back & have a cup of chai 🙂
      Just as we don’t (& often, can’t) monitor prices of a flat just purchased for investment purposes (hopefully nobody on this forum does such things!), so in the same way Leave your monies & thoughts about it & revisit after 3 years.
      No point looking at a Mutual fund or a PMS in a time horizon less than 3 years.
      Meaningful results may be visible in the 3-5 year range.

      Like

  6. Janubhai Panchal says:

    I hope your doing well
    I came to know that, Aditya Birla Capital, Kotak AMC ( SSV series), Sudaram ( Small cap) & Invesco ( RISE).

    ADITYA BIRLA CAPITAL ( AMC) MULTI CAP MODEL PORTFOLIO SSP – 31.40% ( 1 year) 34.10% ( 2 year) 19.10% ( 3 year) 37.10% ( 5 year) 21.20% (SI) 1-Aug-09 (ID)

    KOTAK AMC MULTI CAP MODEL PORTFOLIO SSV – Series I – 28.00%( 1 year) 39.80%( 2 year) 24.20%( 3 year) 34.30%( 5 year) 30.20%(SI) 31-Jul-12(ID)

    SUNDARAM AMC SMALL CAP MODEL PORTFOLIO SMALL CAP 24.60%( 1 year) 26.40%( 2 year) 32.30%( 3 year) 32.30%( 5 year) 20.00%(SI) 1-Nov-09(ID)

    INVESCO MULTI CAP MODEL PORTFOLIO R.I.S.E 43.76%( 1 year) 18-Apr-16(ID)

    Your view on them

    Like

  7. Suket says:

    Hi

    I fantastic read and it has really helped me in crystalizing on the PMS over MF decision and then firming up a view on Fixed vs Profit sharing.

    I am looking to invest with a 5+ yr horizon and have narrowed down to MO and Vallum. But before I finalise was wondering if there is a comparison of the fee’s that these funds charge as well and what components are negotiable. Some of my friends have told me that each can be negotiated – Entry load, Exit & Fixed management fee.

    Thanks

    Like

    • valueinvestingfundsindia says:

      Hi Suket, thank you.
      I don’t have enough data on what’s negotiable and what’s not – if your friends have reached that conclusion, it would be great to know what actually was changed for each of the fees & by whom & in which month this was done (reduced). If you can post this below it will be helpful to all future readers as well.

      Ideally there should be no entry load, as that fee is to absorb the costs of on-boarding you as a new client, which, if the PMS has reached scale is actually negligible. I think worth fighting to get this to 0. There is a sound logic to the exit fee (to prevent the return-chasing butterflies), but if you plan to stay invested I suggest de-prioritize this. The fixed mgmt fee part is, imho, most important. Again, beyond a certain level of scale, this should reduce to be below 1% or even 0.5%; what that level is anyone’s guess + also a matter of preference for the fund manager.

      Like

  8. Sameer says:

    Any thoughts about AIF vs PMS for a long term period 10+ years for those of us looking to move into equities upon receipt of lumpsums 1 cr+? AIF seems more tax efficient, similar to a mutual fund.

    Like

    • valueinvestingfundsindia says:

      Sorry, forgot to reply here –
      No strong views, really. I’d prefer a custom portfolio to an AIF. True the AIF simplifies money management a lot for the Fund mgr, but a consequence for me is I’d have the exact same portfolio as everyone else (like a MF). What would tilt the favor for me for an AIF is if the fees dropped to 1% or below, ideally 0.5%. I’m not actively tracking fees in the AIF space so don’t know what the current trends are – if you do, please feel free to share here. Thanks!

      Like

      • Sameer says:

        Thanks. Between a PMS and an AIF all things being the same i.e. “run by the same manager with the same investment philosophy and the same fee structure” I personally would prefer an AIF for reasons of better transparency (in terms of performance) and tax repercussions to the investor (taxation handled at the fund level). I feel AIFs may be especially useful for those of us who reside abroad and whose tax situation may be complicated with varying India and overseas residence over the several years of investment duration.

        From my very preliminary research there are a bewildering number of types of AIFs (event within a category) so when comparing to a PMS the only apples to apples comparison is “long only, un-leveraged, un-hedged AIF investing only in listed securities” as stated in the prospectus. The Cat 3 AIFs allow the fund manager to be lot more adventurous (hedging, private placement etc.) so that is something for each individual to consider. Also if it matters to someone, all AIFs come with a time period exit load, not all PMSs have a time bound exit load. That is what I have figured out until now, I think. Regards

        Like

  9. ashinjohn001 says:

    Had invested in Porinju’s PMS on February 14, 2018. 2.5 months down the line, I’m down 8% whereas smallcap index has fully recovered. Looks like severe underperformance is happening with Porinju. Vallum capital is no different. They were down 10% vs index change of 3% on the last month.

    Like

    • valueinvestingfundsindia says:

      This is the PERFECT example of how NOT to think about investing (with any fund manager).
      Please consider reading these links carefully, and try to develop a mindset of YEARS for judging things, not 2 months.
      The *minimum* period over which you can deduce anything meaningful about a fund’s performance is 3 years.
      1) https://valueinvestingfundsindia.wordpress.com/how-to-manage-your-return-expectations/
      2) https://www8.gsb.columbia.edu/rtfiles/cbs/hermes/Buffett1984.pdf

      Like

      • Sameer says:

        Re: the 3 year minimum to judge a managers performance, sure its true. However the bigger question is how credible the return claims are when experiences such as lagging the index significantly, occur. The 32+% CAGR for a 16 year period, claims for a ‘model portfolio’ in the disclosure statements… How many people have the model portfolio? How many have experienced similar returns? I looked at EI disclosures from 2007 to date (they are all available on the internet, although their website lists only past 3 years as required by SEBI). Sure the disclosure statements have astounding returns BUT for the model portfolio. How does one achieve that model portfolio in discretionary service? In all my research (admittedly not comprehensive and only internet based), I am yet to come across one individual or anecdote that supports these claims. What am I missing? Is the logic flawed?

        Liked by 1 person

      • valueinvestingfundsindia says:

        Hi Sameer, it is OK and in fact, very healthy to not be convinced easily.

        A few things worth thinking about – for everyone reading this :

        1. Lagging the index significantly is irrelevant. It is the long-term record that matters. Value investors (as against momentum investors or other kinds of investors) don’t care for the index. The only time an index level matters to them is to calculate fees (if fees are bench-marked to an index)

        2. Different people join at different points of time, have different portfolios constructed for them, and naturally, different returns.

        3. Getting a comprehensive return profile of any fund’s performance is hard; as one has to adjust for various things very carefully. There is always going to be room for error, and yes, even room for over-stating. Only SEBI can tell.

        4. In producing a long-term investment track record as an advertisement for future clients, one has to make a series of simplifying assumptions to arrive at what – in the aggregate – is approximately representative.

        5. Neither existing, not future clients can have access to the raw data for this. This means that no individual or entity (except SEBI) can ask for, or independently verify the computations.

        6. Credibility is best left to each individual to determine. Investing in a PMS is discretionary; we always have a choice – should we do it, or not do it? If one feels the PMS manager is not having integrity, then regardless of past performance one should simply not invest. This is the best course of action to prevent future mental tension, heart-burn etc.

        In the context of EI, 2 data points I have are : from July ’16 to Sep ’17, a friend’s portfolio was up 87%. Another friend that joined in Sep’16 was up >50% a year later. [Neither of these truly mean anything, as I said we should only evaluate after 3 years. Perversely, what the front-loading of returns like this does is messes up the mind to want more, more, more]

        Like

      • Sameer says:

        Brilliant and logical as always. Appreciate the reply. I hope I am not asking for too much but your views on AIFs if possible. Regards

        Like

      • Suket Pathak says:

        Hi Guys,

        I am looking at Vallum too. a bit concerned/confused by there fee structures. does anyone have an opinion on (a) Which option is better under what circumstances? (b) are these too high compared to the rest of the pack?

        From what I have been told:
        Option 1:
        Fixed Mgmt Fee 1.5%
        A performance fee of 15% above a hurdle rate of 10% absolute (deferred for the first three years)

        Option 2:
        Fixed Mgmt Fee 1.5%
        A performance fee of 20% above a hurdle rate of Benchmark returns BSE MIDCAP

        Once you add GST to the above at 18%, these fees really add up.

        Cheers

        Like

  10. Milind says:

    Thanks for the detailed analysis.Wanted to know about advantages and disadvantages of Individual and Joint holding PMS accounts.

    Like

  11. vikas rana says:

    It might be more tax efficient to do 2 individual acs..to split tax liability but principal/earnings should come from 2 separate a/cs.
    Joint ac offers benefit of being operated by either of the party..in case of absence etc.

    Should consult CA/CPA on this.

    Like

  12. K chatterjee says:

    Great article. I am re-visiting this article again after 8 months, glad to see the comments as well as the replies to each one of them.
    I had delayed my entry into PMs and thinking to enter now. I have zeroed down to EI or Vallum.
    EI is down -18% in First qtr 2018.
    I know it is against conventional wisdom to time the market, but can this be taken as reasonable time to enter PMS(which are mid & small cap).

    Like

  13. Rajesh Shah says:

    What is your comment on ETF over PMS in 10 years horizon in Indian equity market. Don’t you think in future it will be very difficult for PMS manager to outperform the Index.

    Like

  14. Selvaraj says:

    could someone explain the difference between the management fee:
    1. A performance based fee of 15%, computed above a pre-agreed hurdle of 10%. This is in proportion of the profit earned over and above this predetermined threshold return.
    2. A performance based fee of 20%, computed as per a proportion of the profit earned over and above relevant index (BSE Midcap in our case) is charged

    How one should evaluate two different management fees? any thoughts are welcome.

    Like

  15. Selvaraj says:

    Is anyone has personal experience with Vallum or any information on Mr.Manish Bhandari? based on his interviews and Annual letters, he seems to be smart and look things in long horizon. Any information on his investment style and the company is appreciable? again I’m trying understand him in professional level.

    Like

  16. RAJIB Basu says:

    Dear Sir,
    In the current market situation, do your original ranking helds good ?
    Also, can anybody share what is the return of top 5 PMS in Y2018 ?
    Regards,
    Rajib Basu

    Like

  17. Sameer says:

    Hi
    I am looking at Motilal Oswal (IOP V1, V2, NTDOP), 2Point2Capital and Vallum? If any one has any up to date feed-back on these, request you to share!!

    Also i am not able to trace Vallum on the SEBI PMS monthly performance page, any help in tracing it will be appreciated. Also Vallum’s aum is not increasing significantly as compared to others any idea?

    Like

    • Rishabh says:

      I think you should make your perspective a little more clear, MO is largely into mid & large caps managing around 30,000 clients with AUM of over 10k crore, while the other two are into small and midcap managing less than 500/1000 clients and AUM of not more than 200 cr/500 cr respectively. So first decide which CAP you would like to invest and then maybe shortlist from the available options,if any further help required i maybe reached on djrish@gmail.com

      Like

      • Pankaj Gulati says:

        Hi, I have made some assessment and find that Alchemy High Growth PMS works good for me. It is a Multi Cap fund and has held itself well during the last year of turbulence. Any other feedback on this from anyone?

        Like

  18. Sameer says:

    Thanks Rishabh. I am looking at investing in a PMS which is biased more towards mid and small caps. MO-IOP looks like is more into mid and small caps atleast from the docs they shared with me. The minus point for me though is the AUM size as AUM increases the returns tend to be middling.Also a couple of their picks have been marred with corporate governance issues, which in hindsight looks like they ignored. I quite like the approach of 2point2, with they stating in cash/debt till they find the right valuations/time to enter. Also their value investing focus..Though their returns are good and the downside cpature this year is better than quite a few, on the flip side they have comparatively less experience Also Vallum from my limited interactions with them have been very forthcoming on my queries especially on their investment style, their PMS correcting more than the mid-cap index in this year.. Also a plus point is both 2Point2 and Vallum have a smaller AUM.. For Vallum’s AUM though hasn’t increased much despite having fairly well known promoters likes Manish and Madhusudan. So you see where i am coming from..

    Liked by 1 person

  19. Birsha Haldar says:

    Sageone is starting a small/micro cap PMS from Jan 19 with minimum 1 Cr limit . So , it will be helpfull for people for whom 2 Cr was a stretch.

    Like

    • Santosh says:

      just a note that Sage is not accepting NRI customers for their PMS. They are planning to bring up an AIF where they will accept funds from NRI.

      Like

  20. pjoshi says:

    Hi, I have subscribed to basant’s PMS. A fairly concentrated portfolio along the lines of his philosophy. Worked very well so far and returns went till 15-16% went back near to zero and now bounced back. Have you ever looked at it ? any thoughts on it ?

    Like

    • valueinvestingfundsindia says:

      Hi Pankaj,
      I’m sorry I didn’t respond to your earlier comment :
      Purely from the academic or learning perspective. Why you don’t put Basant as Value investor ? At the same time Porinju in the value investor. Most of the picks from Porinju are from the small/midcap space and are turn around stories. Also some with doubtful management companies.”

      Styles of Porinju & Basant vastly different. One hunts for bargains and the other for growth.
      Basant’s PMS will not have a 5Y track record for another 3Y I think.
      Porinju in the ideal world should have 20+ companies in his portfolio for the kind of idiosyncratic risks he takes, but holds only 10-12. The concentration juices up the returns when things go well, but also burns on the way down. Basant’s concentration level of 4-6 companies is to me a bit suicidal and unwarranted. I think that level of concentration is perfectly fine for him as an individual investor, but I don’t think managing client money with that kind of concentration is a good thing. The lack of diversification is a real concern. The second concern is how much he pays up to buy growth. He seems to be ok with almost any price for growth. There is no doubt that the companies he selects are by themselves are very good or even exceptional. But there’s always a question of price paid for acquiring stakes in them. In my view, he pays way too much.
      Consider : the financials on avg 8+ P/B basis {Bajaj Fin @ 8-10x P/B, AU at 8+ P/B, Bandhan @ 7+ P/B (purch price)}, Consumer at 70+ P/E basis {D-Mart @ 110+ P/E, PVR @ 50+ P/E} Yes there is margin of safety in this kind of quality, so principal loss is very unlikely (this does exist in EqIntel). But one is taking massive valuation & re-rating risk – and the concentrated nature of the bet will not help if things turn south. See the book “Concentrated Investing” – even the world’s foremost investors have kept 8-10 companies. Note these are their own accounts, not client funds. Please see this entire presentation by Samit on this subject. https://www.youtube.com/watch?v=wVC-gUYcS8Y

      Like

      • valueinvestingfundsindia says:

        Incidentally, SageOne rode BF from 1x P/B to about 6. Now, Everyone loves the biz – and one could argue that a kind of excess optimism is baked into the price. A value-oriented fund such as PPFAS demonstrates a much safer way to own BF – via MahaScooters.

        Like

  21. Avinash says:

    Hi,
    I did an evaluation of multiact and Banyan tree PMS, both of them follow value investing. Banyan tree PMS funds are there in the market for more than 10years with a CAGR of 16%. Multiact return for last 8 years is at 16% CAGR. Both claim that fund managers are invested into the same protfolio. Have you looked into this before and your opinion.

    Like

    • valueinvestingfundsindia says:

      Hi Avinash, both are decent options. Multi-act is Live only since Jan 2011 (so ~8Y actually). Neither of them have performed materially better than many mutual funds from the same vintage. You can do some testing on this hypothesis at Valueresearchonline or other sources. What a pure return comparison would fail to capture is how much risk was taken in each of the funds to achieve that return. This is impossible to quantity unless you study the kind of companies that were invested in, their holding periods etc. It may well be that even though their returns are comparable to many MFs, they may have taken lower risk than those MFs to achieve those returns, which is commendable. Vs the index of course both have outperformed. Compare Vallum / SageOne / SIMPL performance from 2011 with either of these, for ex – apples & oranges. For that kind of return profile, it makes sense to be with a PMS.

      Like

  22. Murali Mohan says:

    Hi,

    Could you please point me to the list of PMS which has SIP option?
    Purnartha has a minimum SIP of Rs 50k per month. Are there any others who have similar options?
    Is there any review of purnartha PMS and similar ones?

    Regards
    Murali

    Like

  23. Asutosh Das says:

    Hi,
    I’ve started a PMS with ASK and opted for IEP (India Entrepreneurship Portfolio). CAGR is claimed to be ~19% and I’m okay with it. I’ve opted for STP kind of investment which they had. So it’s around 5L per month for a lumpsum of 25L.
    But it’d be interesting to know your opinion on that.

    Also – I’m considering Vallum now – But Vallum doesn’t have a PMS license and has partnered with Mastertrust for the same. The name of the scheme is Vallum India Discovery Fund. Now with the mid-cap market corrected and elections round the corner, what’s your opinion on:
    1. Going with Vallum – Am happy if the net returns are ~20% CAGR.
    2. The timing to enter into the PMS (not trying to time the market here though).

    Appreciate your thoughts – Thanks!

    Like

    • valueinvestingfundsindia says:

      Hi Asutosh.
      Go with where you are comfortable.
      The license thing @ Vallum is not material to me, but may be for you. I’ve met Manish & Madhusudan etc, spoken several times. So trust is established via different channels. You may not have this comfort and one has to respect that. As an aside, I believe they will have their own license (not via Mastertrust) in the next couple of months or so. But this site is not to make recommendations but simply to offer a range of possibilities.

      You’ve to also ask yourself why two funds – if you like ASK maybe stick to ASK, and add incrementally there.

      Whether it is the right time to enter/add – complex & depends on your age, financial profile etc.. Many factors. Only you will know best. If you are under-allocated to equities then it is probably not a bad time to add.

      Like

  24. Asutosh says:

    Hi
    Thanks much for your reply. The reason for two funds was Vallum fund is more aggressive and Ask is kind of less aggressive. So I wanted to balance it out. I like the idea of trust establishing. I’m going to pursue that with Vallum. Again thanks.

    Like

  25. Shibashish Bhatt says:

    Hi,have been following this wonderful discussion on PMS services.Got in touch with Vallum Capital via e-mail and the response initially was though standard but prompt.Going through their website,realised that they have not published the mandatory disclosure document,so sent them a mail asking for auditor’s certificate validating the portfolio returns that they claim and also asked for a few existing client references,it has been close to a week but have not got any reply.Had almost decided to subscribe to Vallum’s PMS but am now confused.Should I call them and pursue or look elsewhere?

    Like

    • Santosh says:

      Shibashish, when you say you reply to all your queries from Vallum did you mean you got all answered to your satisfaction. Also did you receive auditor’s certificate validating the returns claimed. If yes, was it matching to the claims made on their website ?

      Like

      • valueinvestingfundsindia says:

        Santosh, I’m glad you are doing this kind of thorough vetting.
        For all PMS providers in India, all the data that is uploaded by them to SEBI is audited data. All the returns shared by Vallum, can be directly viewed on the SEBI portal – this is meaningful also because these returns are regularly audited by SEBI itself.
        So we investors have at least the regulator looking out for our interests here.
        One can go a step further and ask for a separate auditor’s certificate of course – but this is typically done once a year (not quarterly).

        Like

      • Shibashish Bhattacharjee says:

        I did try to negotiate the fees but the lady who deals with queries,account opening etc told me bluntly that fee options are not negotiable.They give you two options for performance fee sharing,to choose from.

        Like

      • Shibashish Bhattacharjee says:

        Yes,i have subscribed to their PMS service.Reply to my queries was satisfactory but did not probe too much to be very honest.

        Like

      • Suket Pathak says:

        Hello Shibashish

        I am going through the same and want to proceed with Vallum. Just a bit confused about the fee options. Which one did you pick and why?

        Thanks in advance,
        Suket

        Like

      • Shibashish Bhattacharjee says:

        I have already joined their PMS 2 months back,have opted for the second option,no solid reason for choosing the second option,just my hunch that it would be better than the first.

        Like

  26. Lester says:

    Hi,

    Your article is commendable for its clarity of thought and lucid presentation. Also got to hear for the first time about Sageone and Vallum. Thanks again.

    Liked by 1 person

  27. Anonymous says:

    Thanks for any other wonderful article. Where else may anyone get that kind of info in such an ideal way of writing? I have a presentation next week, and I’m at the search for such info.

    Like

  28. milind says:

    Hi shibashish,
    I am also thinking of subscribing to vallum, just wanted to know how much time they took to setup account and how did the process go through.
    Thanks to admin for brilliant article , seriously hats off to you.

    Like

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