India Opportunity – The way ahead Wealth Creation from Indian Equities ASK Investment Managers October 2014 Advised by 1
Contents Introduction 3 Investment Philosophy, Process and Themes 5 Portfolio Construction 13 Risk Management 14 Investment Team 15 Investment Offerings 18 Performance Snapshot 21 India Opportunity 23 Advised by 2
Introduction: ASK Group ASK GROUP ASK Property ASK Investment ASK Wealth Investment ASK Pravi Managers Advisors Advisors Since 2011 Since 1994 Since 2007 Since 2009 Discretionary Financial Real Estate Private Equity money Planning & Advisory Advisory management in Wealth Advisory Indian equities Advised by 3
Introduction : ASK Investment Managers Leading private money management firm in India Singular focus on managing money in Indian equities – ‘long only’ style Long term investors ‘Bottom - up’ fundamentals driven, value -based stock picking Disciplined research and investment process Experienced team of 3 portfolio managers and 6 investment professionals headed by a CIO Purely discretionary money management Clients include family offices, pension funds, private clients across the globe Advised by 4
Key Investment Objectives 1) Capital Preservation 2) Capital Appreciation over a period of time Advised by 5
Overarching Investment Philosophy and Principles • Greater certainty of earnings Vs mere quantum of earnings growth • Superior and consistent quality of earnings Vs mere quantum of earnings growth • High quality at a reasonable price Vs inferior quality at arithmetically “cheap” price. Advised by 6
Investment Approach • Price the value rather than valuing the price • Buy “growth” businesses at “value” prices • Disciplined investing into outstanding businesses • Seek compounding opportunities Advised by 7
Value Creating Traits that we seek in our investments… • Material Size of Opportunity • Superior Management Quality • Strong Earnings Growth – A Compounding Machine • Superior Quality of Business • Favorable Value Advised by 8
Key Investment Attributes Size of the Opportunity Quality of Business • • High quality of business (Superior RoCE) Size of pond Vs. size of fish • • Strong moat. Impregnability. Dominance • • Sustainability Resilience • • Key pivot of strong wealth creation Liquidity Four key investment attributes Earnings Growth Value • • Favorable Price-Value Gap Quantum • • Margin of Safety Consistency • Durability • Predating (Early Vs Later) • Compounding power Advised by In addition to the above, good management quality is a given constant 9
Investment Themes and Concepts Dominant Other Key Themes Theme + Size of the Quality of Growth Strategy Earnings Growth Value + Opportunity Business Quality of Size of the Life Strategy Earnings Growth Value + Business Opportunity Indian Size of the Quality of Entrepreneur Earnings Growth Value + Opportunity Business Strategy Size of the Quality of Strategic Value Earnings Growth + Opportunity Business Advised by India Select* * > Five best ideas from each of the four concepts, making total of 20 stocks in portfolio > Portfolio to represent an eclectic mix of size, growth, quality and value; to achieve optimal balance 10
Investment Filters Indian Investment Criteria Growth Strategy Life Strategy Entrepreneur Strategic Strategy Typically Top 200 Size of the Opportunity Top 200 businesses Top 500 businesses Top 500 businesses businesses Quality of Business 15% 35% 25% 20% (Targeted Min. ROCE) Growth (Targeted Min. CAGR 15% 12 to 15% 25% 20% Earnings Value (Targeted Min. Price- 15% 15% 25% 40% Value Gap) Dividend payout : Others (Desired) PBT > INR 2 billion PBT > INR 1 billion 35% + Advised by Disclaimer: The process for setting up Investment filters is meant to help filter out inappropriate securities , which do not pre-qualify the desired/targeted criteria set for internal stock selection purpose. ASK is not making an implied or actual promise to any applicant that all the Investments in the respective funds would qualify the above desired/targeted filters all the time .The Investment team would carry its own due diligence to satisfy itself that the Investment criteria for particular fund has been met . 11
Investment Edges • Disciplined adherence to investment philosophy / process • Strong in-house proprietary research • Team bandwidth and experience • Strong relationships and industry interfaces • Comprehensive understanding of Indian businesses and industries • Comprehension of long term secular nature of India opportunity Advised by 12
Portfolio Construction • Investment universe of nearly 200 companies • Detailed evaluation of the character of business and valuation of each firm • Optimal aggregation of about 20 stocks, to construct a stable and consistent portfolio, to generate superior returns over time • Adequate sector diversification • Model portfolios for all strategies • “Portfolio Psychographics” - proprietary portfolio review tool • Strict buy discipline: Focus on margin of safety, pre-defined levels for each strategy/concept Advised by 13
Risk Management • Integrated risk management and review mechanism throughout the investment process • Disciplined Buy and Sell mechanism • Discipline of buying businesses with reasonable margin of safety • High discount factor (of 15%) for cash flows in our financial models builds conservatism in value estimation • 6-8 interactions per year with the management team of every portfolio company • Individual stock cap at 10% • Risk Manager is responsible for monitoring and supervising the risk of the portfolio and implementing the risk management framework • Regular and ongoing monitoring and reporting Advised by • Independence of Risk Management Function – reports to Group CFO & Head Compliance 14
Biography Bharat Shah – Executive Director – ASK Group Internationally renowned with over two decades of capital markets experience • Prior to joining ASK, was CIO at Birla MF, one of India’s largest Mutual Fund houses managing nearly USD 1.65 bn • Built ASK Investment Managers into one of India’s largest providers of discretionary PMS services, managing • close to USD 525 mn. Significant domestic and international recognition for investment performance • Prateek Agrawal – Business Head & CIO – ASK Investment Managers Has 20 years of experience in capital markets with SBI Capital Markets as Head of Research (10yrs) , and Head of • Equity with ABN Amro and Bharti Axa AMCs (3.5yrs each) In SBI Capital Markets besides heading research he was part of team that handled VSNL privatization for the • government and handled Hindustan Zinc for Vedanta group. On the advisory side he was actively involved in the power sector and in the oil and gas space. At ABN AMRO MF, he was head of equity and managed nearly INR 1200 cr of equity domestically and advised • offshore assets worth USD700 mn and delivered stellar performance. He then helped set up the equity business at Bharti Axa IM in the post Lehman period. He joined ASK Investment Managers as CIO in April 2011 • Advised by 15
Biography Gaurav Misra – Senior Portfolio Manager Over 18 years of experience in Investment Research and Portfolio Management • Manages Growth and Life strategies • Includes 10 years of experience in Private Equity and sell side research. Has been with ASKIM for over 8 years • and worked with IL&FS group prior to that Is an MBA from IIM Lucknow and BA Economics (Hons) from St. Stephen’s College, Delhi • Sumit Jain – Portfolio Manager 8 years of experience with ASK Investment Managers • Manages Indian Entrepreneur Portfolio strategy • Also engaged in research of business within ASKIM universe, identifying new investment opportunities and • tracking their performance at regular intervals Sudhir Kedia – Associate Portfolio Manager Started career with ASK and has over 8 years of experience in Investment Research and Portfolio Management • Research exposure in diverse sectors like FMCG, Auto & Auto Ancillary, Cement, Media, Infrastructure, Real • Estate, etc. Strong academic background and a qualified CA (ICAI), CMA (ICWAI) and PGPEB (MBA) and B.Com(H) from • Calcutta University Advised by 16
Investment Options - Offshore Advised by 17
India Emerging Opportunities Fund (IEOF) • Launched in 2003 • Regulated by FSC, Mauritius and SEBI, India • FII - Rogers Asset Management Ltd. , Mauritius • Investment Advisor - ASK Investment Managers Pvt. Ltd. • Administrator - Deutsche International Trust Corporation (Mauritius) Ltd. • Auditors - Ernst & Young • Bankers - Deutsche Bank, Mauritius • Custodians - Deutsche Bank, India • Tax efficient structure for investing in Indian markets Advised by 18
IEOF - Investment Offerings India Emerging Opportunities Fund (IEOF) SHARE CLASSES# NAV FUNDS SEGREGATED ACCOUNTS Growth Indian Entrepreneur Fund Strategic Life Fund India Select Advised by # Only select classes are shown here 19
INDIA OPPORTUNITY Advised by 20
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