Funds managed
| Fund name | Asset Class | License |
| Carnelian Capital Compounder Fund 1 – Close Ended | Hedge fund (Long only) | SEBI AIF Cat 3 |
About the AMC
- Asset management firm based out of Mumbai.
- Key staff :
- Vikas Khemani (Co-founder) – He is a CA and a CFA charterholder. He has 22 years of capital markets experience, most recently as the CEO of Edelweiss Securities Ltd.
- CA Sachin Jain (Co-founder) – He last served as Chief operating officer (COO) – Capital Market Group at Edelweiss.
- Manoj Bahety, CFA (Co-founder) – He has 20 years of financial services experience with Edelweiss Securities, Morgan Stanley, RIL, HPCL. He is also a CA charterholder.
- Swati Khemani (Co-founder) – She is a CA and has 7 years at Edelweiss Financial Services across the Investment Banking and Institutional Equities businesses including equity research and institutional sales.
Investment Philosophy (for firm)
The Investment Philosophy is governed by the following investment principles:
- We believe in growth investing
- We obsess about risk reward trade-off
- We prefer definite returns over immediate returns
- We don’t mind short term under-performance
- We are happy to be contrarian when risk-reward payoff is compelling
- We don’t mind sitting on cash
We strive to identify companies where we can capture high growth phase triggered by various catalysts like change in management/CEO/industry structure/business strategy, balance sheet improvement, product innovation, etc. which will lead to re-rating in valuations. We also like stable businesses operating in growing markets, run by proven and experienced management, generating robust cash flows with superior capital return ratios available at reasonable valuations. We shy away from businesses which are regulated, cyclical in nature, have poor corporate governance and low returns on capital.
About Carnelian Capital Compounder Fund 1 – Close Ended Category III AIF
- Long only, multicap and sector agnostic fund
- Absolute Return oriented
- Focused on fundamental driven growth investing
- Bottom up stock picking using our unique framework
- Objective to create long term sustainable alpha
Fund Theme: Multicap, sector agnostic fund focused on fundamental growth driven Investing across three baskets (Magic, Compounder, Opportunistic). Magic basket (60%) aims at investing in stocks to capture both earnings growth & valuation re-rating. Compounder basket (30%) aims at investing in growth businesses with an aim to compound on earnings growth. Opportunistic basket (10%) focuses on capturing short term tactical opportunities. Funds aim to generate ~18-20% return and aims to invest with 3-5 years perspective.
Media
- Title – Carnelian Capital Advisors on Market Strategies | NSE Closing Bell, YouTube, Nov 26, 2019
The interview is about the investment philosophy. Please find the conversation in Q&A format.
Q- What are the 3 baskets and how are they different?
A- Magic (icici bank, axis bank, icici securities, Nippon asset management and lic housing) consist 60% of total portfolio- He says he looks for earnings growth and valuation re-rating; combining both you make supernormal returns.
Compounders-28% (kotak bank poly cab, century plywood, vmart) he sees only earning growth, valuation re-rating may or maynot be possible. Well established business, well proven management, but again at reasonable price not very very expensive. This gives stability to the portfolio.
Opportunistic-12% -Bajaj consumer- he says he capture once in a while market gives you a good opportunity (mentions- block, special situation and IPO)
Q: why Nippon in this magic category? Thesis behind this? Just the management change?
A: Under this we see good sound solid stocks trading cheap or lower valuation because of particular situations either poor management or group overhang. (https://youtu.be/JKOsaokIm7I?t=286)
Q: holding period for opportunistic basket?
A: between 30 days to 6 months 12 months. Not necessary.
- Title – Watch Out For the Telecom Sector: Carnelian Capital, YouTube- BloombergQuint, Apr 22, 2019
Summary: Talking only about short term bets on sectors.
Analyst questions
- In your investment philosophy, you say you are obsessed with risk-reward trade-off. What does that mean?
- For an opportunistic basket you look for short term opportunities like special situations, can you be more specific?
- You follow “Long only” hedge fund strategy, a traditional strategy in the Hedge fund. The primary source of risk is equity oriented risk in such strategies, how do you manage that?
Prepared by – Sonal Narwani
Reviewed by- Rashika Bhatia
11th May 2020
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