What is the ABC Equity Portfolio?
India focused equity PMS (Separately Managed accounts) by OAKS AMC
What is the ABC Portfolio?
The ABC Portfolio is an equity strategy investing in Indian equities and available via a Portfolio Management Service (PMS) [SMA in global parlance]
The name captures the investment approach
A –Absolute return orientation & Agnostic to the benchmark
B – Basic approach of investing in trends core to India’s evolution
C – Concentrated in portfolio construction (15-20 names)
It is offered by OAKS Asset Management - a Mumbai based independent asset manager in the Indian private and public equity space.
What is the investment strategy
The ABC Portfolio follows a top-down macro driven approach. This applies both to selection of areas to invest in and to how we manage risk.
We believe that a paradigm shift is underway since 2020-21 as energy and goods supply chains are being reset and geopolitics has become a real factor. These changes affect the bedrock of the existing order and reserve currency system. Given the scale of this potential transition globally, if ever there was a need to incorporate macro thinking into investing, it is in this decade.
Using our approach, we identify a set of trends with local (Indian) and global tailwinds and invest around the evolution of those trends.
We capture these trends via an All - cap portfolio with a large cap bias and manage it with an absolute return orientation i.e. we seek to generate returns during supportive times and preserve capital during turbulent times.
We typically take 3-4 months to deploy capital for any new account and customize the buying to the time of initiation. We also have a mandate to keep up to 20% in cash (post initial deployment) for managing ongoing risk.
What are the transformational trends that it invests into?
Our big picture view for India is that it is starting the transition from a low income (~2500$ per capita) to a middle income (7000$-10000$ per capita) economy over the coming decade. This is similar to the transition made by multiple nations in the past e.g. Korea (early ‘70s), China (late ‘90s).
We convert this big picture into 5 key investable trends in the portfolio
Building a manufacturing ecosystem in India
Converting agriculture into an organized industry
Creating a digital society and digital economy
Developing infrastructure to support GDP growth
Forging national champions in sectors of strategic importance
The holdings in the portfolio would attempt to capture the above mentioned trends in a way which offers an asymmetric risk - reward.
How would the ABC Portfolio fit into an investor’s asset allocation?
We are an outlier among Indian asset managers who follow a top down, macro driven approach as most tend to be bottom-up managers.
The ABC Portfolio seeks to invest into transformative trends at a relatively early stage. This implies that we allocate to areas which will become a much bigger part of the benchmark indices in coming times.
This also implies that we ignore popular trends of the past decade, which are a big part of current indices / portfolios. Hence, we currently don’t own
Private banks
IT services
VC backed consumer tech
Consumer durables
Pharmaceuticals
Paints & Specialty chemicals
This makes our approach and portfolio composition relatively unique and has low overlaps with other allocations.
In Summary
It is one strategy for all our best ideas. There is no need for the investor to decide on which themes, market caps or fund types
The investor doesn’t need to bother about market timing. We follow a staggered deployment process, use cash when needed and invest around the cycle of each trend.
We ignore popular trends of the past which leads to minimal overlap with most existing fund offerings and leads to a high Active Share.
The ABC Portfolio seeks to generate alpha at scale i.e. generate excess returns with the ability to deploy or remove significant capital with ease.