ETMarkets Fund Manager Talk: Momentum indicators help this money manager to handpick 15-30 stocks for AIF

“We also look at momentum indicators to arrive at a final selection of 15-30 stocks every month. As per regulations, no single stock is more than 10% of the entire portfolio” says Vineet Bagri, Chief Executive Officer, Athena Investments, Trust Group.

In an interview with ETMarkets, Bagri, said: “We have a target universe of about 100 stocks which are under our active coverage. Within these stocks, we look at fundamental indicators as and when they become favourable at a given price” Edited excerpts:

Help us understand what is ‘Stock Convertible Scheme’?
The SCS is a Cat III AIF that is designed to generate an absolute return from a basket of stocks using equity derivatives. As the name suggests, the product is designed to invest in fixed income, which will convert to equity in case there is a fall in prices of shares.

The product underlying is a diversified universe of 100 stocks, from which the fund manager will select a basket of 15-20 stocks every month.

The product carries equity risk, albeit the risk is lower than direct equity since the purchase prices are lower, and there is a portfolio hedge that is built into the product.

How much AUM are you managing? And, how much do you propose to raise?
This is a new fund launch and we are currently in the offer stage. We propose to raise about ₹ 1000 Crores in the next 12 months

Interestingly, the AIF is pegged to be better than fixed income. Can you break it down for our readers?
This product is benchmarked against the CRISIL Composite 75:25% Hybrid Index. It carries lower risk than equity because of the construct of converting into equity only when there is a fall in prices.

Additionally, there is inbuilt protection that works as a stop-loss mechanism in case there is a March 2020 type of scenario. The scheme offers monthly liquidity with no exit load. There are no performance fees, only a fixed fee.

How do you pick investments/stocks for the AIF? What is the valuation methodology?
We have a target universe of about 100 stocks that are under our active coverage. Within these stocks, we look at fundamental indicators as and when they become favourable at a given price.

We also look at momentum indicators to arrive at a final selection of 15-30 stocks every month. As per regulations, no single stock is more than 10% of the entire portfolio.

Who could invest in this scheme and what is the minimum investment?
The scheme is open for investment to all investors, individuals, non-individuals (companies, partnerships, trusts), financial institutions, and non-resident individuals.

The minimum subscription amount is ₹ 1 crore, as prescribed under the AIF CAT III regulations.

How do you manage risk in the portfolio?
The risks on the portfolio are managed at two levels, viz. by taking long positions only at depressed prices, and having a portfolio-level hedge that prevents a March 2022 type of scenario.

Can this theme also help investors in retirement planning with the quarterly payout option?
The quarterly payout option is a feature that enables the distribution of all profit generated during any quarter to the unit holders.

This distribution is not guaranteed and is contingent on the fund generating profit for the quarter.

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