Spark Asia Impact Managers

About

With the PMS license coming through in November 2018, two approaches are currently being offered, subscriptions for both of which are open:

a) India@75 Flexicap Strategy: This approach will have the leeway to position the portfolio across the cap-curve continuum, depending on the team’s assessment of valuations, risks and volatility. Instead of being aligned with only a specific market-cap range, the strategy will look for safety (read large-cap) in phases characterized by frothy valuation and elevated risks; it will look to add to beta (read mid- and small-cap) when it believes valuation has turned saner and risks have receded. The belief is that this approach will seek to optimize client returns by tweaking portfolios to reflect attendant market realities. With a portfolio comprising 20-25 stocks, the objective will be to deliver superior returns adjusted for risk. Open-ended and long-only in structure, the minimum investment into the strategy is Rs 5 million.

b) Core and Satellite Strategy: This strategy aims to capture on rotational sector momentum that is a key feature of Indian equity markets. While the core portfolio will reflect positions backed with high conviction that can have a holding horizon of over 12 months, the satellite component of the portfolio will focus on names where there’s momentum on account of near-term business drivers and event-related triggers (and a shorter holding period). The portfolio will comprise between 12-18 names. Given the strategy’s concentration, it is best suited for investors who understand the volatility inherent in equities and can be patient with their capital. Expected minimum ticket size for this strategy is Rs 5 million.

Across both these approaches, investors have the option of being onboarded either directly (Direct Plan) or through a distributor/partner/intermediary (Regular Plan). 

Key staff

Parameswara Iyer Krishnan, fund manager and CIO,  is the Head of the EAM business at Spark Asia Impact Managers Pvt Ltd. He is an industry veteran with over 32 years of experience in asset management across India/Regional Equities. Krishnan had a highly successful stint of 19 years with DNB Asset Management (DNB), a leading Scandinavian fund management house that is part of the largest bank & insurance house in Norway. During his tenure, he helped build Carlson Fund and DNB as the most credible India and Emerging Market voice in the Nordic region between 1998 and 2017.

Nagarajan R, Vice President and head of operations, joined the organization in April 2021. He previously worked as assistant vice president at JM Financial and has total experience of 20 years.

Investment philosophy

We are investors in India’s growth at the right price. The price of growth needs to be sized up in a world of uncertainties. We seek to create alpha over market returns. Managing risks is key to achieving this. To do so, we need to understand the risks we run and the blind spots. Robust process and diversification of alpha sources is key to repeatable results. Recognising mistakes and taking corrective action is critical to this. Great investment results are as much about painstaking and patient execution as they are about stock-picking.

We are firm believers in the dictum that financial products including equities have a fair price. The Indian equity story derives its optimistic outlook from the promise of growth that India holds forth. Piece these together and we get one important cornerstone of our investment philosophy – which is that we are investors in India’s growth but only at the right price. No stock can be a Buy or even a Hold at all prices.

The second cornerstone of our philosophy underscores the fact that business cycles are getting shorter and therefore the same will apply for market cycles. All businesses carry some cyclicality. For some, it may be more pronounced and for others, it might be less so. In order to add value to our client strategies, a keen understanding of what drives growth and what can slow down growth is essential.

The third pillar of our investment philosophy is an acute recognition of the fact that fund managers create alpha and beta in the domain of the market or the gods. A level of historic return, perceived as high, generated at the level of the market or a specific strategy/approach or product, does not tell us much. Our emphasis is on building alpha over time and letting the market go about its business of discounting the growth in the economy at a pace and trajectory of its choice.

The fourth piece of our philosophy stresses the importance of risk management and that of good process. As India matures as a market, execution is going to be the key differentiator. Business mortality risk, management risk, cyclical risk, liquidity risk, balance sheet risk and valuation risk are all key to the success of execution. Our philosophy is accepting of the need to zero in on risks we may not understand well enough and focus on mitigating those.

The fifth aspect of our philosophy is what we will emphasize are hygiene factors. In an emerging market like India, management can make or take investor returns. Identifying management capability and alignment is critical. The other hygiene factor is in determining whether the business we invest is generating or is poised to generate returns on capital in excess of cost of capital on a sustained basis. The ability to generate shareholder value will depend on these. These are hygiene factors and do not offer investment nirvana.

Finally, the last and a crucial pillar of our philosophy is a lesson in humility. Recognising mistakes, benchmarking investment outcomes and not being a prisoner of any style are important to generate and repeat alpha. For alpha generation to be sustainable and repeatable, the sources should preferably be many. Diversifying the source of alpha, understanding the drivers, measuring them and building on the same, block by block – these are key to the good execution we seek to achieve. Part of this is understanding alpha destroyers as well. For this to be effective, we are clear that we should not be boxed into an investment style. Flexibility is the most potent weapon that we carry in our armory.

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