Karma Capital Advisors

About

Karma Capital Advisors Pvt Ltd. (KCA) is a Mumbai based independent investment management organization founded in 2005. KCA is domiciled in India as a private limited company. The firm has value driven investment philosophy with a medium to long term time horizon. KCA is a SEBI (Securities and Exchange Board of India) registered and regulated portfolio manager. It offers Discretionary portfolio management services to domestic high net worth individuals, Family Offices, Institutions and Corporates, and Investment management and advisory services to offshore institutional investors like Endowments, Pension Funds, SWF and Family Offices.

Key staff

Nikhil Desai: Nikhil Desai is a Director and Co-Founder of KCA. Desai has professional expertise of over 21 years in the field of Portfolio Management and Research in Listed Equities across several market cycles. At KCA, he is the Portfolio Manager besides contributing to the overall corporate management. He started on a full-time career in the Investment Management field in 1993 when he joined as a buy-side equity analyst at ASK Raymond James Securities. Desai went on to manage discretionary equity assets of domestic high net worth and offshore investors at ASK Raymond James. In 2003, he joined ABN AMRO Bank’s Private Banking division as Head of its Equity Assets business. At ABN, he was responsible for formulating the equity investment strategy and managing segregated equity assets of very high net worth investors.

Rushabh Seth:  Rushabh Seth is the Director and Co-Founder of KCA. Rushabh has over 21 years of experience in money management business in India primarily in listed equities. In his career of over two decades in money management business in India he has been involved with various formats of money management like Portfolio Management, Mutual Funds and Offshore funds; and has been closely involved in the evolution of Fund Management industry in India. He is the Portfolio Manager and also has other corporate responsibilities as Director of KCA. In his engagements prior to KCA, he was the CIO (Equities) at Kotak Mutual Fund (part of Kotak Bank Group) from 2003 to 2005. He started his career at ASK Raymond James (now ASK Investment Managers) in 1993. He joined ASK as an Investment Analyst and was later involved in various roles at ASK including Director – Business Development and Portfolio Manager.

Funds managed

Karma Wealth Builder PMS (Discretionary Portfolio Management Service)

The primary objective of Karma Wealth Builder PMS is to build wealth and create value for the Company’s clients; consistently, over long period of time, and across economic and market cycles; by investing its clients’ funds in equity and equity related securities, subject to, inter alia, the specific needs, if any, of every individual client.

The investment approach is based on in-house fundamental research and potential investment candidates are assessed on various parameters on the business, management and valuation criteria. The product has a flexible investment style to move across sectors, market capitalizations and cash levels. Derivatives may also be used selectively for hedging purposes.

Karma Long Term Equity PMS (Discretionary Portfolio Management Service)

The primary objective and the investment approach of this PMS is essentially the same as that of Karma Wealth Builder PMS described above, the only differentiation being in the structure of the product i.e. it has a investment horizon of 2 years.

Karma Portfolio Management Services (Discretionary Portfolio Management Service)

The primary objective and investment approach of this PMS is essentially the same as that of Karma Long Term Equity PMS described above, the only differentiation being the calculation.

Non-Discretionary Portfolio Management Services

Non-binding Investment/ Divestment recommendations made to clients under this PMS are based on a similar Investment Philosophy and Approach as outlined in case of the Discretionary PMS above. The differentiation under this service is the pure recommendatory nature involvement of the Company without directly dealing in the funds or securities of the clients.

Investment philosophy

KCA follows a “bottom-up” investment philosophy to conserve and build wealth over longer time frames and across market cycles. They believe that investing requires the right Technique, Patience and Discipline and that these factors are the key differentiators in performance over longer periods and market cycles.

KCA’s Investment Philosophy is centered on

• Value investing with a margin of safety
• Absolute return mindset
• Focus on risk adjusted returns
• Think independently, even sometimes contrarian to general market consensus
• Compound wealth over a medium to long term horizon

Process

KCA employs an active, hands-on investment approach that combines both value identification based on fundamental bottom-up analysis with a top down macro overlay. The bottom-up investment process requires them to have a “kick-the-tyres” approach to research; hence we rely mainly on our in-house research though they get a lot of research inputs from various external sources. 

Their in-house research effort is responsible for generating, cataloguing, and tracking the majority of the ideas for their portfolios. The methodology involves detailed fundamental research including industry, business, accounting, financial, valuation and management analysis. 

Style

KCA’s portfolio construction approach is index and market cap agnostic. KCA typically maintains a concentrated portfolio with about 20 to 25 names with exposure limits for each position and sector. Their investment ideas primarily originate from an investment universe consisting of about 225 companies that they closely track and follow. KCA seeks diversification by investing across various sectors and has a value driven investment philosophy to identify potential investment opportunities where they look for substantial change (with a catalyst) that can lead to unlocking or creation of value. 

The typical time horizon for most investments is between 24 to 36 months.

Portfolio risk is monitored quantitatively through sector limits and stock limits, as well as metrics such as liquidity, turnover and number of new ideas in the portfolio. 

Analyst questions

1. The investment objective of all the portfolios seem to be the same except the time horizon. Could you elaborate on what else are the differentiating factors in the stock selection and portfolio construction process in between the three portfolios offered ?
2. In the “Karma Portfolio Management Services”, it is mentioned that the only differentiator is the calculation. Could you elaborate on that and how it adds value to the investor in terms of generating alpha ?

Prepared by – Aditya Singh

May 2021