The impact of this was apparent in last month’s performance of PMS (portfolio management service) funds, an investment tool used by rich investors. The top-10 performers were mostly largecaps or sectoral funds. However, there was one outlier.
Right Horizons’ Minerva India UnderServed, which follows a strategy that primarily invests “in institutionally under-owned or orphaned space”, trampled the competition to emerge as the top performer in August.
It delivered a return of over 13 per cent in August. In the past three months, the strategy has given 57 per cent returns, more than twice the returns of Bonanza Portfolio’s value fund, which came second. In the last one year, Minerva India UnderServed has more than doubled investors’ money.
Piyush Sharma, the manager of this decade-old fund, said it was the fruit of right stock-picking and patience. “It’s critical to not lose sight of the fact that smallcaps, in general, and several institutionally under-owned names, in particular, saw an extended period of material multiple compression getting into FY22. This recent, somewhat violent recoil should be viewed in that context,” he told ETMarkets.com.
The fund has just 14 stocks in its portfolio. As of now, cash is its third biggest holding. Among top equity holdings of the funds are JK Paper, Steel Strips Wheels,
, PVR and , according to publicly available information on PMS-AIF World.
“We prefer asymmetrically valued situations and don’t mind waiting for long periods. This is important because these positions are typically not beneficiaries of liquidity tailwinds and, therefore, value capture could take longer than what you see within headline names,” Sharma said.
To be fair, Minerva India Underserved still trails some of its competitors in longer periods. But it is its recent outperformance that has grabbed eyeballs. But the question is, given the sharp rally in smallcap space, can it continue to deliver? Sharma was confident that his strategy would work.
“Our median holding trades at around 12.5x FY22 EBITDA, or at 15-20 per cent discount versus the median Nifty 50 and Nifty Smallcap 50 component, despite clearly better earnings traction,” he said. “We believe that our current book has appreciably more value to be captured because our holdings have created value from sustainable underlying earnings growth versus despite a distinct lack of it elsewhere.”
How others performed?
Most funds that focussed on largecaps were among the top performers in August. Assets of Concept Investwell’s Dynamic portfolio — that holds names like
, Bajaj Finserv, Mindtree and ICICI Bank — appreciated nearly 11 per cent.
Kotak’s Fintech Strategy, Green Portfolio’s Index Fund, NJ Asset’s Bluechip and IDFC Asset’s Neo Equity Portfolio were among those that delivered over 9 per cent, according to data collated by PMSBazaar. However, they still could not beat Nifty or Sensex returns in the month.
Among celebrity fund managers, Bharat Shah’s Financial Opportunities, Indian Entrepreneurship and India Select Portfolio; Saurabh Mukherjea’s Kings of Capital and Consistent Compounders; and Sameer Arora’s India Rising were among the top performers, delivering 6-9 per cent. Basant Maheswari’s Equity Fund and Mukherjea’s Little Champs were among those that saw a cut in their assets.
Unlike the last two months, when not many funds delivered negative returns, August saw nearly 50 strategies losing money. Nine River Capital’s Aurum Smallcap, which has been outperforming others in recent months, was the biggest loser. It delivered a negative 8.3 per cent. Green Portfolio’s Dividend Yield and ICICI Prudential’s Pipe portfolios were among the other big losers.
PMS funds are long-term investments and a month of underperformance may not mean much to them.
