Richard Pattle, CEO of Drew Beacon, a Bangalore-based firm that manufactures its own alternative investment funds, discusses their various investment strategies including their flagship fund launched in September 2019, which takes exposure to Nifty 50 companies and overlays it with futures, options, and derivatives positions. Pattle notes that their PMS launched in August 2021, uses back-tested data to identify the behavior of Nifty 200 companies under various factors to make alpha plays. Pattle also highlights concerns regarding inflation, stating that it is a huge worry globally, and that India has done well in managing it, with the government taking a relatively conservative approach. He believes that India is well-placed to navigate inflation concerns and that outperformance of India is likely to get stronger going forward.
I'm the um co-founder and CEO of uh Drew Beacon we're based in Bangalore and we manufacture our own alternative investment funds for onshore investors we also have our own PMS uh which is our Nifty 200 product as well and we also have a a presence in gift city of international investors from around the world including investors from here in Dubai who want to invest into the equity Capital markets and we operate a hybrid long-only long short funds as well and last but not least we also do wealth management for ultra high net worth and high net worth clients as well right and can you take you to uh the strategies that you have yeah so our first our Flagship fund was launched in September of 2019 it takes exposure to nifty 50 companies and then we overlay that with our own Futures and options and derivatives positions to make the uh the portfolio about half as volatile but still outperform the market over a multi-year Time Horizon
so that's been very popular to investors who are currently in India for overseas investors we have a very similar strategy running out of GIF City we also have another onshore fund that is a mix of nifty 200 and debt as well and that again is a an agile fund that aims to outperform that weighted index uh if you were doing that passively and then last but not least our PMS was launched in August of last year again focused on Nifty 200 companies uses a huge amount of back-tested data to identify the behavior of those stocks when certain factors are under um underplay so we call that the equity Factor Quant PMs and that is not going to reduce the volatility necessarily of the underlying portfolio and held in the traditional dmat way but actually is an alpha play so it's all about Alpha over and above the return of the Nifty 200. right um so you talked about the stocks that 250 stocks in the universe if we say realistically is 300 companies even though six thousand uh come also are listed and these 300 has been the focus of mutual funds and then the PMS so how do you what do you do create Alpha compared to let's say mutual funds yeah well
it's all around for we have two lots of uh long only um as I as I said our alternative investment funds are chiefly focused on uh nifty 50 so an even smaller Universe there but we have um a small but very highly focused team based in uh Bangalore obviously you've got a vast experience in this so we're trying to generate some Alpha there but going specifically to the PMS that's an exciting uh product for many of our clients because it is using as I say all of these data points and the behaviors of these stocks uh under perhaps around 120 factors that may be a player any one single time so that we know when to enter and to exit a slightly higher churn
because it's a very active uh obviously set of strategies that are running on that but it is uh you know this isn't about stock Pickers in isolation sitting out obviously the the fundamentals are fed into um you know our own dietary Algos for producing the model portfolio but it's around and the the analysis of this vast amounts of data for each of these companies going about 10 years right uh let's talk about inflation I mean it was uh until a few months back it was a very big concern globally then it came down a bit uh but recent data points are like suggesting it might be sticky it's not going down yeah so how big is that uh worry is that inflation part uh globally
I think it's a huge worry I think the inflation again we and true Beacon have been talking and highlighting the dangers of inflation uh for the last 18 months or so before it's become this sort of mainstream uh conversation in in financial markets we've seen central banks around the world that have come too late to the party too little too late um and I think actually in comparison India has done very very well at managing um inflation has been very cautious and so on but if we look at other economies we still have double digits inflation uh the the the normal inflation of pre-pandemic was clearly in the sort of you know two three percent Zone um they there are some signs that the inflation is certainly not Rising but it's not falling as quickly as possible and this has been the story for when um major economies perhaps in the early 1980s and so on uh you know it takes a number of years to get inflation under control
I think most worryingly perhaps in some other economies around the world is wage pull inflation and that makes this even more sticky because once you start inducing that into the economy it's not just about dampening down consumption it's also about what you do for for companies salary Bills going forward as well so that baking that in makes it even more dangerous so it remains a big concern for for us when we look at other markets in the Alesso because it has dealt with inflation for you know a moderate level of inflation for quite a few decades it seems quite well uh placed to to navigate that and also as I say I think the government in India has taken a relatively conservative approach on making sure that it's kept under control all but that doesn't plunge the economy into you know a very difficult couple of years so last year we saw India relatively outperforming yeah markets highly underperforming yeah uh now the things sort of reversed in the first few weeks of this year yes do you
think with the inflation worries coming back that an outperformance of India is going to get stronger going ahead yeah I do I think uh as I mentioned in one of the panels earlier on uh I was in the US a couple of months ago and I was talking about how our fund and gift City if we look at we launched in in May of 2021 and we looked up until the end of last year uh a new Rank and stack all of the global indices whether it be in the US the UK France Germany Singapore Hong Kong Shanghai um you know India in dollar terms even with the rupee depreciation was the only one in positive territory and it was outperforming all the other Global indices by between 10 and 45 percent things have changed and that's not necessarily what has happened to the Indian markets in isolation it's what's happened to the other Global markets my own personal view is that um there has been perhaps um a little bit of over enthusiasm uh particularly in the U.S markets uh even back home for me in in the UK over the last couple of months and so I wouldn't be too concerned about it and I would also point to the very strong dollar
of course the dollar as a historic uh you know highs over the last couple of um decades and that's not helping when we look at dollarized returns of course but that again I think will be a rather transient phase as the world gets back to normal in H2 of this calendar year right so what would be the next big triggers for the market the markets have become like quite a little bit boring in the recent past what would be the next big trigger that take it Forward negative side positive side um we I'm I'm not that I'm not a investment uh professional myself we have obviously my co-founder Nicole kamath who's got huge experience here we have our own CIO who manage all of that what I'd say markets are never boring by the way uh they're always exciting uh minute by minute but I think that um what we're looking you know with the strategy is that we run are not necessarily fixated on um exactly timing issues in terms of how the markets will behave either are hedged alternative investment funds are trying to reduce that volatility so it's a it's a more of an all-weather approach um so that we are continually that weighted Benchmark of of asset allocation between fixed income uh and the equity markets we're trying to outperform or indeed whether markets go down by five percent up by 10 we're trying to score positive Alpha
so for us um we uh we're we're looking at that um I think for the rest of of this year I think we're all waiting for Global markets to get into equilibrium in terms of what is real consumption not consumption that is post pandemic India obviously has got quite a compelling although less optimistic than we had all thought in terms of GDP growth but you rank and stack that across the world that continues to be a great story and um we you know we're continually also looking at our International investors and what products they want as well so we we started in gift City uh
we're talking to institutions and so on about what foreigners want in terms of equity exposure in India but also what we can do for our high net worth and ultra high net worth clients from India outside as well possibly under lrs right you're talking about the gift City for the interview uh recently the tedious part uh got increased on lrs investment yes uh how big is that practice it's obviously um some it's it's certainly not going to help with with lrs
I mean I think that for us we're exploring how we can build portfolios for our clients who are onshore in India not just in the country but overseas as well and that's part of you know most individuals wherever they are in the world they have Global exposure they have India exposure or Home Country exposure and so on I think for for us um what uh we hope at some stage to be able to do instead of lrs flowing out to places like Dubai or to Singapore or to London to the US is it um that actually India is able to set up a hub uh in gift City uh to allow Indian Nationals to participate in global markets that are on the gift
City exchanges um so that they can diversify their portfolios uh and actually so that India isn't losing that business to places like the UAE okay got it uh one question in the PMS industry in India Indian PM is alternative investment industry uh it has been pitched a place where uh there's like different style of invest investing concentrating bits uh they can cater to individual needs uh the risk profiling and everything uh and it can generate Alpha but in the if we look at Short Term period three four years I mean the five seven years period uh
there's been underperformance overall in terms I'm talking not talking about specific PMS industry um how would you address that and how long an investor should wait in the in this alternative uh segment to get that out performance yeah well this is an India issue it's a global issue since uh investing started uh and so we're all in a game of uh obviously it's either trying to outperform uh a passive strategy that the investor might take or indeed to score Alpha
I mean those are the two options uh I mean it's a very hard thing to do if it was easy everyone would be doing it uh I'm delighted you know from our point of view our aifs if you look at that weighted Benchmark we've we've actually doubled the weighted Benchmark um if you look at our three and a half year track record and that's done through um the analysis of where the market is going and within that running very effective strategies and sub strategies within our fund that will contribute to the overall p l for our PMS again you know very early days
but we already have three four percent you know Alpha over a six month time period and and that will go up and down but I think that foreign investor doesn't matter where you're investing you have to take you know an approach where it we really need to look at two three four years to see whether that player is capable not just of scoring out for outperforming the weightier Benchmark
but actually to do that consistently so I think that's what our investors uh look to right uh not talking about the Global Investors who want to invest in India uh like we're in Dubai we are pitching alternatives to um nris and then recently reports came like Hindenburg and George Soros comments coming up uh does it uh impact India's appeal in any way I thought well I think these the news stories like these going around the world are never going to be helpful to India or any other country I mean this is not an issue that's particular I mean we have to remember where the where the report came from and their vested interest in making sure that the company under scrutiny um the the stock price and the metrics do fall of course um but I think that anything that um either implies a lack of governance at um country or regulator level is not helpful however um whether it's this particular group under scrutiny other Global groups under scrutiny I think you have to be patient to find out uh which of these um allegations uh have any substance if any um and to allow the regulator in whichever country to do their business as well to investigate them fully so uh obviously anything that's you know a negative story for any corporate anywhere in the world is not going to um you know have a very positive light in the country that operates in but this is not a an issue particular to India it's happened all over the world and it will continue to happen as well
No comments:
Post a Comment