|Buoyant Opportunities Strategy
|All weather portfolio
|Across asset class
|Units of mutual funds and etfs
Buoyant Capital is owned by four professionals with a total of over seven decades of stock market experience in leading firms in Indian capital markets such as Nippon India MF, HSBC, Nippon India Life Insurance, and HDFC Securities. The firm offers both discretionary and non-discretionary PMS.
Sachin Khivasara, Director – Sachin is a Chartered Accountant and Cost and Works accountant from ICAI and ICWAI. Sachin has over 25 years of investment experience in equities. Prior to co-founding BCPL, he worked with investment management funds like Reliance Mutual Fund (presently known as Nippon India Mutual Fund), Edelweiss and Enam Group
Jigar Mistry, Director – Jigar is a Chartered Accountant and charter-holder Certified Financial Accountant from AIMR, US. Jigar has over 20 years of investment experience tracking listed equities. Prior to co-founding BCPL, he worked with an analyst with HSBC Securities, Kotak Securities, and Prabhudas Lilladher.
Investment philosophy (for the firm)
Buoyant Capital’s basic investing construct is to decipher underlying cycles in the markets to improve its odds of earning superior returns for investors.
They classify all stocks in our universe as being CORE or SATELLITE, terms that are easy to relate to. A CORE stock will typically have a steady business trajectory and growth prospects, cleaner cash flows, and more of a secular character that is easily apparent over time. A SATELLITE stock is one that, under the influence of good conditions, can grow business volumes, revenues, and profits very quickly, but this may not be sustainable over longer periods as the good conditions fade.
They turn defensive when they see the odds loaded against investors (difficult times coming up), only to turn aggressive and load risk when we can sense that better times are around the corner. In DEFENSIVE mode you will see the portfolio veering more towards CORE stocks and sectors, while in AGGRESSIVE mode, Buoyant leans towards the SATELLITE variety.
The Capital mindset
Given their propensity to align with cycles, it is natural that they take sectoral calls before they take a stock-specific call. This calls for a deep (and long) understanding of a sector to properly gauge whether a cycle is about to build up (or is in the process of topping out). The world’s largest active asset manager (Capital International) has no star fund managers. Instead, it has sector specialists who take sector-specific decisions much like fund managers within their own sectors. These folks have several decades of research and investing experience in their respective sectors.
They have a similar mindset. Instead of relying totally on a single (generalist) fund manager, we have sector specialists within the team who decisively contribute to the stock selection and portfolio construction. This increases the odds of reading early signals accurately when cycle changes are on the way.
Under the Opportunities portfolio, client money will primarily be invested in equity shares and equity linked instruments issued by companies that are listed in India. Some part of the money might be invested in units of money markets and liquid funds and part will be retained as bank balance.
The Opportunities portfolio’s investment approach depends on the manager’s stance (either aggressive or defensive). When Aggressive, the allocation will be higher towards the ‘Satellite’ vertical compared to the ‘Core’ vertical of the portfolio, and vice-versa. The Satellite vertical comprises three sub-verticals: Cyclicals, Turnaround, and Value whereas the Core vertical comprises businesses that have predictable cash flows that may offer higher dividend yield and may comprise companies that are leaders in their respective sub-sectors.
Allocation of portfolio across types of securities: Once fully invested, equity and equity-linked instruments will have an allocation in excess of 70% whereas bank balance, money market funds, and liquid funds shall comprise the balance.
Goal: To outperform the BSE100 Index Benchmark and basis for the choice of benchmark: BSE100 Index. BSE 100 Index offers an equitable mix of businesses in different industries and sectors, as well as different market capitalizations.
Under the All Weather portfolio, client money will primarily be invested in equity, ETFs, equity derivatives, mutual funds, convertible/non-convertible bonds/debentures/FDs, REITs, InvITs, commodity derivatives, and currency derivatives.
The All Weather portfolio shall be constructed with securities belonging to both ‘risky’ and ‘stable’ asset classes. The ‘risky’ asset classes comprise equity, equity ETFs, equity derivatives, Indian mutual funds (including equity and hybrid funds), convertible bonds/debentures, overseas ETFs, overseas mutual funds, and currency derivatives. The relatively ‘stable’ asset classes include Indian mutual funds (debt funds), bonds/debentures/FDs, ETFs, REITs, and InvITs.
Allocation of portfolio across types of securities: The All Weather portfolio construction approach depends on the manager’s stance (either aggressive or defensive). When Aggressive, the allocation will be higher towards relatively ‘risky’ asset classes compared to the relatively ‘stable’ asset classes and vice-versa.
Goal: To deliver low volatility, positive returns over the long term. Benchmark and basis for the choice of benchmark: Nifty 50 (40%), CRISIL Composite Bond Index (50%), London Gold (10%)
Under the Liquid strategy, client money will primarily be invested in Units and ETFs of Mutual Funds
Basis of the selection of such types of securities as part of the investment approach: The Liquid strategy shall be Investments into units that can be liquidated easily and carry a low risk of default.
Allocation of portfolio across types of securities: The Liquid Strategy shall allocate up to 100% of investment in a liquid fund or ETF.
Goal: To ensure high liquidity by investing predominantly in highly liquid money market instruments and debt securities of very short tenure.
Benchmark and basis for the choice of benchmark: CRISIL Liquid Fund TRI
Jigar Mistry presents information about the Buoyant Capital Fund, which has generated a 21.2% compound annual growth rate (CAGR) post-fees and expenses since it was started in June 2016. The fund has been rated five stars by PMS Bazaar and Basis for a three-year period ending in December 2021, indicating strong performance in terms of both returns and risk management.
The speaker explains that the fund is run by three Chartered Accountants with more than 20 years of experience, each of whom is a sector specialist. The speaker then discusses the importance of investing through market cycles rather than just identifying companies with strong growth potential. He explains that even strong companies can experience periods of underperformance when their stock prices outpace their fundamental value. By identifying and investing through market cycles, the fund can achieve superior returns with lower volatility. The speaker also emphasizes the importance of customization in portfolio management rather than relying on model portfolios. The fund aims to provide personalized and flexible investment strategies based on each client’s risk tolerance and financial goals. The speaker discusses the advantages of investing through a PMS (Portfolio Management System) compared to investing directly in stocks. They highlight that a PMS allows the manager to run the portfolio in a unique fashion, investing in businesses that make sense at a particular time and waiting for others that don’t. This is in contrast to investors who tend to invest every day the money is received. The speaker explains that they have a robust system in place that allows them to treat each portfolio as if it is the only one they are running, and they can be aggressive or defensive in their investments as needed.
The speaker also emphasizes the importance of having “skin in the game,” meaning that they believe that if they ask investors to invest in a fund they run, they should also be investing through it themselves. They mention that this is a topic close to their heart and that they do not see many other investors doing this. Overall, the speaker is advocating for the benefits of a PMS and the importance of alignment of interests between investors and fund managers.
discussing their investment philosophy, which involves breaking their investment universe into two parts: core and satellite. The core portion of their portfolio is made up of businesses that are considered predictable, generate consistent cash flows, and have a well-defined reinvestment plan. These are typically companies with leadership position in their respective industries and may not require much cash for growth. The speaker believes that while core businesses are important, they should not be the only focus of an investment portfolio.
The satellite portion of the portfolio comprises businesses that are considered more opportunistic and may be undervalued or overlooked by the market. This can include cyclical businesses, turnaround opportunities, and value stocks. The speaker acknowledges that these businesses may not always be great companies, but they may present great investment opportunities.
The speaker believes that many investors focus too much on identifying great companies and not enough on identifying great investments. They use the example of Tata Steel, which had a stagnant stock price for 20 years before experiencing a turnaround. Rather than focusing solely on whether a company is good or bad, the speaker suggests that investors should ask whether a business has the potential to generate strong returns in the future.
The speaker also emphasizes the importance of risk management and diversification. They suggest that investors should not try to time the market or buy and sell at the top and bottom, but rather should aim to be part of the ride during market cycles. The satellite portion of the portfolio can be more aggressive, while the core portion is designed to protect capital during market downturns.