The investment industry is going through a series of changes. Increasing awareness among investors has raised the bar for the entire Portfolio Management Service (PMS) industry. Improvements in regulations are directed towards transparency especially keeping in mind the interests of the investor community. Investor friendly disclosures, reporting, and other submissions have been made mandatory for asset managers. There are very few players like QED Capital Advisors LLP who are operating on the principle of charging fees only after demonstration of performance.
The Company with a Proven Track Record
QED Capital Advisors LLP (QED Capital) is a SEBI registered Portfolio Management Services (PMS) firm. It has the objective of being a boutique asset management firm catering to HNI clients by providing them a simple to understand, long-term investment product with a fee structure aligned with interests of the client. QED stands for “Quad Erat Demonstratum” – which translated to what needs to be proven and demonstrated. According to independent research, behavioural factors in decision making are resulting in lower average returns for individual investors compared to overall returns possible from stocks. The aim is to avoid those biases by following a process driven approach to investment. QED Capitals is one of the few PMS firms in the country who does not charge a fixed management fee. It only charges a performance fee above a hurdle rate. As the name suggests, the company believes in charging a fee only when it has demonstrated and proven performance returns to its clients.
Competent and Committed Leadership
Anish Teli is the Managing Partner and Principal Officer of QED Capital. He is a rank holding Chartered Accountant and an MBA from the Indian School of Business, Hyderabad. He has been a successful investor in Indian equity markets for over fifteen years. He has worked in senior positions with private equity firms like ICICI Venture and Morgan Stanley Private Equity Asia. During this time, he continued to evaluate opportunities in the listed equity space also. Beginning in 2011, he started focussing full time on listed Indian equity markets. He also conducted research and developed quantitative trading systems and has been using them successfully since 2012.
The Purpose behind the Inception
The purpose behind starting QED Capital was to provide clients with a simple, transparent and aligned investment product. This would help compound their assets over the long term, by tapping into the huge investment opportunities India offers. The company provides services for all, from UHNIs, Family Offices, and mass affluent investors. The investor education campaigns and demonetization have resulted in a shift in attitudes and more savings are flowing into financial assets than physical assets. Studies have shown that there is a ‘Behaviour Gap’ between returns of the market and returns which an investor is able to reap from the market. The company wants to bridge this ‘Behaviour Gap’ by applying process driven decision making combined with disciplined execution.
Client Service with Unique Products
The company offers its flagship product ‘Alpha-Bets’ to PMS clients. The objective is to generate the long-term capital growth from an actively managed portfolio of equities. Alpha-Bets’ works with investment method of combining fundamental parameters with long-term measures of momentum in a sophisticated manner. Alpha-Bets is a suitable product for investors who are ready with an investible surplus for the stock market for the period of at least five years or more. Robust risk management ensures the preservation of capital during adverse market conditions. The portfolio only includes stocks which confirm to companies’ stock selection filters and criteria’s which help in delivering superior returns compared to the benchmark. Since inception it has delivered returns (post fees and expenses) of 16.84% p.a. vs benchmark returns of 11.7%. On the downside, the portfolio has seen a maximum drawdown of 6.5% vs 9.94% of the benchmark. Hence, QED Capitals has managed to do better on absolute as well as risk adjusted parameters. The returns stated above have been calculated by the custodian HDFC Bank and certified by its auditors.
Simple Process for Reliable Results
In decision making, the company uses a mix of qualitative and quantitative analysis in the stock selection process. Investment process at QED Capital has three simple steps.
- Investment Universe – Select 500 companies – market capitalization > 500 Cr.
- Quantative Filters – Reduce them to list of 80-100 – filters Growth, EPS, RoE, overall strength.
- Qualitative Filters – Reduce them further to 15-20 stocks – Growing sectors, sector leaders, re-rating catalysts and well-managed companies.
Preparing for Challenges
Some of the challenges in the industry are lack of a standard way of evaluating the performance of a portfolio manager. Many fund managers were deviating outside their stated mandate called as ‘style drift’, in order to achieve performance in the short term. Asset manager’s reputation depends on the timely reporting of data, transparency in fees, and portfolio performance. Technology is being used to better manage routine transactions and managers are able to focus more on value addition and customization to their clients and investors.
Future Full of Opportunities
There seems a bifurcation happening in the asset management industry. Companies are either very large and standardized players or small/boutiques customized with better alignment of client interests. The portfolio and wealth management industry is still in its infancy in India. Indians are getting richer by the day and PMS industry has yet to reach them. There are about one lakh fifty thousand families in India with the wealth of over 25 Cr rupees or more. These families are expected to rise to around five lakh by the year 2025. So, the companies will have to gear up in terms of manpower to address this opportunity. PMS providers like QED Capital Advisors LLP are coming up with innovative solutions to address the need.
Source :-The 10 Most Valuable Portfolio Management Service Providers in 2018
