Portfolio Management 1:01

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Portfolio Management 1:01

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Portfolio Management 1:01 Presentation at IIM, Calicut Some Key Concepts Approaches to Portfolio Construction Top Down v/s Bottom Up Value v/s Growth Think of Cycles ... – PowerPoint PPT presentation

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Title: Portfolio Management 1:01

1
Portfolio Management 101

Presentation at IIM, Calicut

2
Some Key Concepts

Approaches to Portfolio Construction
Top Down v/s Bottom Up
Value v/s Growth
Think of Cycles nothing is linear
Client Requirements
Match Needs, Requirements and Abilities
Risk
Use Math Computing as tools
Make Bets Explicit
Why are you diversifying?
Your OWN Portfolio?

3
Elements of Portfolio Construction
Top Down
Growth
Value
Momentum
Bottom Up
4
Decomposing Approaches
Top Down
Sector
Country
Asset Class

Equities
Bonds
Currencies
Property
Commodities
Oil
Precious metals
Natural Resources

Developed Markets
Emerging Markets
Regional markets

FMCG
Pharma
Services
TMT
Manufacturing
Cyclicals

5
Decomposing Approaches
Bottom Up

Volume
Price
Efficiency
Costs
Assets
Restructuring

Technical Charts
Reflexivity
PE/G
Option Value

Momentum
GARP
Value

Payback
EV/EBIDTA
P/E
DCF

Dividend Yield
Price/BV
Replacement Cost

6
Some Lessons from History

Japan V/s UK in 1944
Korea V/s India in 1950
Singapore!
Hero Honda V/s Kinetic Honda
Bharti V/s IDEA
Infosys V/s HCL
HDFC Bank V/s SBI

There is NO trade-off between Top- Down and
Bottom up
7
Think of Cycles!

Nature is cyclical, not linear!
Life Cycles
Business Cycles / Boom-Bust
Seasonality
Innovation / Schumpeter
Market Cycles

8
Valuation Approaches
Value
Growth
Momentum

Illiquid
Misunderstood
Hated/Uncovered
Appraised value

Institutional Favorites
UVG Stories
Imagine it!
DCF or Option value

Max Volume
News Flow
Volatile
Technicals

In Reality, there is no distinction. Growth and
Momentum are LongTerm/Short Term Value catalysts
9
OUR VALUATION SCREEN
10
VALUATION BENCHMARKS
11
Think Client Management

WHO is the CLIENT?
WHAT does he want from you?
HOW are you shaping his expectations mindset?
WHY should he stick to you?

Most clients would rather have their fund
manager fail conventionally than succeed
unconventionally. Marc Faber
12
CHANGING NEEDS OVER A LIFETIME
Equity/Bonds Property Art/Misc
Own Business
House
Durables
Daily Exps
13
KYC and Thyself!
Pvt. Banks / Pension Funds / Macro Funds/ Fund of
Funds
Relative
Asset Allocation
Country Allocation
Regional Funds
Sector Allocation
Country Funds/ Mutual Funds
Large Cap
Small Cap
HNW / PMS / Absolute Return Funds/ Hedge Funds
Absolute
14
Key Success Factors

Institutional Marketing
Deployment of Large Pools
Capital Preservation

BCA GLOBAL
Pvt. Bankers / Pension Funds / Macro Funds
BCA EMG MKTS

Marketing Scale Scope
Economist

Regional Funds

Fund Manager
Technician

BCA CHINA
Country Funds
INDIA FUNDS
Absolute Return Funds

Stock Picker

15
Risk Mitigation

Formulas / Computers are tools, not cast in stone
Sterling Crisis
LTCM
Markets discount the rate of change most
metrics measure history
Understand logic of EMT, CAPM and Beta do not be
bound by it.

Risk is something I manage between my ears.
Warren Buffett
16
Make Explicit Bets

Asset / Sector / Class
Use Computing to make interrelations and risk
explicit scenario modelling
Catalyst
Reflation Upgrading Debt Rating Margins
Valuation
Payback, DCF, etc
What will make you change your mind?
Your weightage should not be led by
overconfidence !

17
IDEAL PORTFOLIO
75
18
Decompose Decompose Decompose
19
Decompose THEN Consolidate

A good investor is a good businessman and vice
versa

20
Typical Career Path to Nirvana
Analyst
Head of Research
Fund Manager
Abs. Manager
Own Funds
Large Fund Manager
Even Larger Fund Manager
Marketing Guru
21
How is your Portfolio Tilted?
OWN INTERESTS
CLIENT TIME
PROFESSIONAL COLLEGUES
WORK COLLEAGUES
FAMILY
BUILD A CONSCIOUS LIFESTYLE !
22
HEAVEN AND HELL