Tata Asset Management (PMS)

About

Tata Portfolio Management Services (Tata PMS) is managed by Tata Asset Management Limited (TAML). It was established on 15th March 1994. They have a presence in more than 80 locations across India. It is the only portfolio management company in the country that follows the excellent business model of the USA i.e Malcom Baldrige Model.

Registration No. INP000001058

As of 31st January 2021, TAML is managing assets over Rs 56,460.58 crores by managing forty open-ended schemes and seventeen close-ended schemes of Tata Mutual Fund.

Key staff

Chairman- Rajiv Sabharwal (https://www.linkedin.com/in/rajiv-sabharwal-9556a412/) – Head- Danesh Mistry – Danesh has over 16 years of experience in the field of equity research, fund management, investment banking, mortgages, capital markets, etc. Previously he has also worked with HDFC and ENAM Securities. 

Fund Manager- Tejas Gutka (https://www.linkedin.com/in/tejasgutka/) – Tejas has worked as a Credit Rating Analyst, Equity Research Analyst, Investment Strategist, and Multi-Asset Portfolio Advisor. He was responsible for formulating strategies and advising direct fixed-income investment for larger investors. He had also evaluated the creditworthiness of Indian corporates at CARE ratings during 2006-2009.

Funds managed

  1. Tata- Bluechip Plus Strategy
  2. Tata- Bluechip Strategy
  3. Tata- Emerging opportunities strategy
  4. Tata- Consumption Strategy
  5. Tata- ACT
  6. Tata- Enterprising India Plus
  7. Tata- Enterprising India
  8. Equity Participation Investment Series
  9. Structure Product Investment
  10. Tata- Focussed Investment
  11. Tata- Fixed Income Investment
  12. Tata- Liquid Investment

Tata- Bluechip Plus Strategy

Objective: To seek long term capital appreciation by investing primarily in the equity and equity-related instruments of large-cap companies whilst diversifying risk with gold ETFs and related instruments

Stock selection process: Bottom-up. 

Types of Securities: Equity (85% to 100%) and Gold ETF (up to 15%)

Allocation:

  • Large Cap: 75% to 100% of equity allocation
  • Mid & small cap: up to 10% of equity allocation
  • Gold ETF: up to 15% of the portfolio

Benchmark: Blended benchmark Blend (85% NIFTY 50 & 15% Gold Benchmark)

Holding Period: >=3 years

Tata- Bluechip Strategy

Objective: To generate moderate capital appreciation with relatively lower risk over the long term.

Types of Securities: Equity

Allocation: 

  • Large Cap: 90% to 100%
  • Mid & small cap: up to 10%

Benchmark: NIFTY 50

Holding Period: >=3 years

Tata- Emerging opportunities strategy

Objective: To generate capital appreciation with relatively higher risk over the long term.

Stock selection process: Bottom-up

Types of Securities: Equity

Allocation:

  • Large Cap: up to 30%
  • Mid & small cap: 70% to 100%

Benchmark: NIFTY MID CAP 100

Holding Period: >=3 years

Tata- Consumption Strategy

Objective: To seek long-term capital appreciation by investing primarily in the equity and equity-related instruments of companies most geared to capture the Indian consumption story.

Stock selection process: Bottom-up

Types of Securities: Equity

Allocation:

  • Large Cap: 70% to 100%
  • Mid & small cap: up to 30%

Benchmark: NIFTY India Consumption Index

Holding Period: >=3 years

Tata- ACT

Objective: To generate sustainable capital appreciation over the long term.

Stock selection process: Bottom-up

Approach:

  • A -All Weather Stocks-

Businesses that have delivered consistent profit growth and have reinvested their profits to further their growth agenda. Business model being Predictable, Profitable, Sustainable and De-risked amongst others 

  • C – Catalysts for Growth

Businesses that have gone through a period of dislocation either in the markets they operate or because of external factors.

  • T – Turnaround Candidates

Businesses that are going through a period of dislocation or slowdown in their operating metrics due to factors relating to their own business operations and/or industry dynamics, external operating environment

Types of Securities: Equity

Allocation:

  • All-weather stocks: 40% to 50%
  • Catalysts for Growth: 25% to 30%
  • Turnaround Candidates: 25% to 30%

Benchmark: S&P BSE 200

Holding Period: >=3 years

Tata- Enterprising India Plus

Objective: To invest in two broad asset classes: namely gold ETF and equity and equity-related instruments.

Stock selection process: Bottom-up 

Types of Securities: Equity and Gold ETF

Allocation:

  • Large Cap: 30% to 70% of equity allocation
  • Mid Cap: 30% to 70% of equity allocation
  • Small-Cap: up to 30% of equity allocation
  • Gold ETF: up to 15% of the portfolio

Benchmark: Blended benchmark Blend (85% NIFTY 500 & 15% Gold Benchmark)

Holding Period: >=3 years

Tata- Enterprising India

Objective: To generate long-term capital appreciation by investing in enterprises that benefit from India’s long-term growth potential as well as the demographic dividend.

Stock selection process: Bottom-up (up to 20 stocks)

Types of Securities: Equity, Cash and Cash equivalent

Criteria for selection of stocks:

  • Ability to generate/sustain a high return on invested capital
  • A high degree of certainty of growth from reinvestment of cash flows at high rates of return
  • Resilience to change, particularly technological innovation
  • Niche competitive position with advantages are difficult to replicate
  • Low reliance on leverage to generate returns or fund future growth (for non-financial businesses)
  • The valuation that is attractive relative to the long-term cash flow generation potential

Allocation:

  • Large Cap: 70% to 100%
  • Mid Cap: 70% to 100%
  • Small-Cap: up to 30%
  • Cash and Cash Equivalents -liquid fund, overnight funds, money market instruments, etc

Benchmark: NIFTY 500

Holding Period: >=3 years

Equity Participation Investment Series

Objective: To provide income/capital appreciation in the medium to long term by investing in equity /equity-related instruments and/or in fixed income instruments including market-linked debentures (MLDs) as may be opted by the client. Though there is no guarantee as such.

Type of Securities: Equity and Fixed Income Instrument

Selection and Allocation as opted by the investor. 

Structure Product Investment

Objective: To allow the investor to participate at varying rates in the upside/ downside of an underlying in a suitable non-symmetrical payoff for various tenors (e.g. 12-60 months).

Type of Security: Fixed Income Instrument

Selection and Allocation as opted by the investor. 

Tata- Focussed Investment

Objective: To generate high capital appreciation by taking concentrated bets on a few stocks based on the theme of the portfolio. The underlying portfolio would have a focused approach based on sector-specific bets, a combination of multiple sectors, investment theme(s), large-cap, multi-cap, mid-cap, or small-cap, etc. 

Approach: 

  • Customized portfolio could be built for Ultra HNI investors.
  • Portfolio-based on any emerging ideas.
  • Customized investment approach for the clients of any of our business partners.
  • Would consists of both liquid and illiquid stocks.

Type of Securities: Equity

Selection and Allocation as opted by the investor. 

Holding Period: >= 36 months

Investors can invest via the STP option.

Tata- Fixed Income Investment

Objective: To invest in high yield debentures and other fixed-income instruments issued by Tata companies or SPVs promoted/managed by Tata companies.

Types of Securities: 

  • High yield fixed income securities
  • Rated/un-rated listed/unlisted securities
  • Selection & use of suitable instruments and structures to mitigate liquidity/re-investment risk
  • Maturities will be in line with the PMS Portfolio maturity

Selection and Allocation as opted by the investor.

Holding Period: >= 12 months

Tata- Liquid Investment

Objective: To facilitate investors to take Asset Allocation calls between Cash & Equity.

Type of Securities: Liquid Funds & equivalent instruments: Upto 100%

Benchmark: CRISIL Liquid Fund Index

Investment Philosophy

TRUST- Transparency, Research, Understanding, Service, and Technology

The investment process includes the following:

1. Emphasis on fundamental research 

2. High quality of companies in the portfolio

3. Disciplined approach to investing 

4. Focus on risk-adjusted returns 

5. Consistency of returns

Investment Methodology:

Multi-dimensional approach with a high emphasis on quantitative analysis, including financial modeling and advanced forecasting techniques. 

Tata PMS USPs:

Performance:

Source: Disclosure Document Tata PMS

Minimum Investment Amount:

Higher of the following: 

  1. Minimum amount as specified by SEBI from time to time. (which is currently Rs. 50 Lacs) 
  2. Amount as per the discretion of the Portfolio Manager

Investment Plan:

  1. Bronze- Rs. 25 lac – Rs. 50 lac,
  2. Silver- Rs. 50 lac – Rs. 1 cr,
  3. Gold- Rs. 1 cr – Rs. 5 cr,
  4. Platinum- Rs. 5 cr and above

Media

Link: https://www.youtube.com/watch?v=sz-vf-5yE98

Link: https://www.youtube.com/watch?v=sz-vf-5yE98 (PMSBAZAR)

Link: https://youtu.be/WtjErYSRwjs (PMSKART)

  • Concentration in equity
  • Red Flags while picking stocks: Cash flow (How much profitability is converted in cash flows?)
  • Top-Down approach

USP: Long Horizon and Good Quality Businesses (Quality is reflected by the cash flow metric)

Exit Strategy: 

1) Anticipated trajectory vs actual trajectory- though there will be a difference if the difference is significant then identify whether it’s due to external factors or internal factors. In the case of external factors give some more time whereas if there are internal factors then exit.

2) When the company makes unrelated investments or at the time when the balance sheet doesn’t allow them.

Philosophy: Having a set asset allocation and keep rebalancing at a certain time interval

According to Mr. Tejas, it’s difficult for MFs to take cash calls. Allocation to be left to either investor or advisor and the fund manager has a mandate of buying equities and not let him take cash calls.

Link: https://youtu.be/l4SujObOh0k (PMS AIF World)

The stock market is the place where both momentum as well as mean reversion can be observed in quick successions with each other.

Diversification across investment styles:

Actually, not all turnarounds do turnaround as there are lot of value stocks that end up being value traps and therefore to manage the risk of portfolio, turnaround investments are diversified across 8-10 stocks.

Analyst questions

Q1: In ACT PMS what financial parameters you use for the classification.

Q2: Why Act fund has BSE as a benchmark while the rest of all funds have NIFTY as the benchmark. What is the rationale behind this?

Q3: Do you make cash calls? Which factors govern these decisions. 

Q4: Apart from Gold ETFs, do you use any other strategies for hedging in Blue Chip Plus and Enterprising India Plus portfolios?

Q5: In Equity Participation Investment Series, Structured Product Investment, Tata- Focussed Investment, and Tata- Fixed Income Investment portfolios why selection and allocation are at the discretion of the investor? What role does the fund manager play in these portfolios? Also, no specific benchmark for these portfolios, why so?

Q6: In Tata- Liquid Investment portfolio, how do fund managers facilitate investors in allocating liquid funds?

Prepared by Rajesh Pathak, May 2021

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