The context of this question is to gauge the level of risk we are taking. Too low? Too high?
We manage your money as we manage ours. We are not attempting to generate the highest returns in the short term but for consistent returns over the long term. The guiding framework is resilience over speed.
Small/Mid/Large composition is misleading to gauge underlying portfolio risk.
Read MoreRakesh Jhunjhunwala, India’s favourite investor, passed away yesterday at the young age of 62. The world knows him for his wealth, his passion for investing and for his wit. I am privileged to share a side of him not many knew by virtue of my association at his family office “RARE” between 2006 to 2014 and the mentoring I benefited from till his last days.
Rakesh “Bhaiya,” as he was affectionately referred to, was perhaps the strongest believer in the India growth story that I have known. His reasoning was India’s democratic roots and consensus-based approach meant growth would be more long lasting and gain momentum with reforms.
Read MoreDear Partners:
In order that we can share our thinking on the current situation in Ukraine with all partners, we have put together a brief note that summarizes trends we see, their implications, and how we intend to act. I hope you find it useful.
A caveat. The situation is evolving and we typically see first order effects at present, but there will be second and third order effects which only become clearer with time. Hence, this note is “work in process”.
It is now clear that a macro risk (Russia/Ukraine) has become a known event. Not surprisingly the markets are selling off as new information is factored into prices.
No one knows how this will end or its short term implications. If anyone tells you they do, it tells you more about them than their forecasting abilities.
Read More“In life, the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.” (Kwame Anthony Appiah http://appiah.net/)
CLSA is a reputed broking house. It published a report 2 days ago recommending investors book profit in India.
We agree with CLSAs that valuations in India, on aggregate, are stretched. In our last letter we mentioned, we were “cautious, but not bearish” and that because we have borrowed returns from the future, we could be in for a period of muted returns.
Read MoreYou may observe we are gradually slicing out of our Specialty Chemical positions to re-allocate elsewhere.
A key choice we need to make is whether to trim on valuation excesses or to let positions compound and accept incremental underperformance due to valuation de rating.
Essentially, what game are we playing?
Read MoreThe most frequent question we get from partners is what do you think will happen to the market.
Bitter truth: it is the wrong question to ask because no one knows.
Why is this so? Because markets move due to multiple variables, not all of which are visible or predictable.
Read MoreIn trying to optimize short term performance and also long term performance simultaneously is a very hard game to play. We can choose to be smart in the short term or in the long term – but can’t choose both. It’s a rare genius that can trade short term and invest long simultaneously. Most people who claim they can do this lie about their returns.
Read MoreFranklin Templeton Mutual Fund, on Thursday announced it would wind up six credit funds with a large exposure to higher-yielding, lower-rated credit securities.
Why did they do so? The Corporate Bond markets in India are fairly illiquid. FT schemes have got impacted because they invested in papers with low credit rating (they actively took on credit risk).
Read MoreAs a follow up on the 2 scenarios we shared earlier on 18 March, the scenario likely to play out is perhaps something between Scenario 1 and Scenario 2 that we envisaged. No one knows, “for sure”, the road map to normalization. We are likely to see 2 steps forward and 1 step back approach based on “trial and error”.
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