About
Spark Fund Managers is the Equity Asset Management (EAM) arm of Spark Capital (Spark). It is SEBI registered portfolio management company(INP000006235). It was registered on 14th November 2018. It has mainly two offerings under its Portfolio Management Services, i.e. India@75 Flexicap Strategy and Core and Satellite Strategy. Both of them mainly deal in listed equities.
Key staff
P Krishnan is the Head of EAM business and also the Chief Investment Officer. He has 30-plus years of experience in the asset management industry in places such as DNB, Carlson Fund and Franklin India Bluechip Fund. His area of expertise lies in the Asian emerging markets such as China, Taiwan, Korea and India.
Funds managed
India@75 Flexicap Strategy: The objective is to generate long term capital appreciation/return by investing in equity/equity-related instruments across market capitalisation curve. 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 characterised 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 optimise 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.
Investments will be made in listed equities and surplus cash will be parked in liquid/money market instruments.
Factors that affect stock selection include size of growth opportunity, quality of management, strength of balance sheet, liquidity of stock and attractiveness of valuation among others.
Benchmark : BSE 100
Fees:
- Fixed Management Fee – Direct Plan : Shall not exceed 1.4% of average daily AUM, charged on quarterly basis.
- Fixed Management Fee – Regular Plan : Shall not exceed 1.75% of average daily AUM, charged on quarterly basis.
- Performance Fee : Shall not exceed 10% per annum above a hurdle rate of 12% per annum
- GST @ 18% on fixed management fee and performance fee
Core and Satellite Strategy: The fund aims to generate returns ahead of that generated by market index by deploying funds both strategically and tactically across a concentrated portfolio of stock. 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). For more details, please refer to our Disclosure Document.
Aim is to build a portfolio that consists of a stocks with a strategic view(long term) and with tactical view(lower holding horizon).
Benchmark : BSE 100
Holding horizon is typically 2 years for core stocks and lower for satellite stocks.
Fees:
- Fixed Management Fee – Direct Plan : Shall not exceed 1.1% of average daily AUM, charged on quarterly basis.
- Fixed Management Fee – Regular Plan : Shall not exceed 1.5% of average daily AUM, charged on quarterly basis.
- Performance Fee : Shall not exceed 10% per annum above a hurdle rate of 12% per annum. Hurdle Rate to 15%, fees shall not exceed 10% and for returns between 15-20% it shall not exceed 15%. For return beyond 20%, fees shall not exceed 20%.
- GST @ 18% on fixed management fee and performance fee
Investment philosophy
They believe that good investment results follow a robust process and a well-articulated investment process will give confidence to investors that good results are also repeatable.
They also focus on risk management as much as they focus on results and believe business mortality risk, management risk and the cyclical risk are all factors that will determine outcomes.
Cornerstones of their investment philosophy:
1. Emphasis on a clear process for execution of an investment mandate.
2. Focus on building a strong team to give effect to the processes and ensure business continuity.
3. Build an institutional-grade platform for execution of various investment strategies that gives risk management its due, even as we back our best ideas with significant capital allocation.
4. Flexible in approach to adapt to the requirements of a fast-changing investment environment.
5. Humble enough to accept that we can make investment mistakes and plan corrective action before such errors compound.
Media
https://drive.google.com/file/d/11GbLRdaMRRKQ2LS38v7SD2_J0y6xm2Zs/view
Analysis: Their emphasis is on externally facing stocks as opposed to very consumer driven stocks. They believe it is prudent to focus on listed Indian companies that are globally competitive for example IT, Healthcare. Key focus is on earning visibility and earning resilience such as Insurance. They also give huge emphasis on investing at fair value of a stock and not overpaying for it. Lastly management quality, balance sheet strength, business model scalibility and sustainability forms a base for choosing companies while portfolio construction.
Analysts questions
- What does your investment analysis process look like?
- On what basis do you decide the allocation of sectoral weights?
- What are the exit strategies that you use?
By : Aditya Pratap Singh
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