|Fund name||Asset Class||License|
|Unifi High Yield Fund||High yield bond and event driven||SEBI AIF Cat 3|
|Unifi Green Fund||Listed Equity (Mid and small cap)||SEBI AIF Cat 3|
Unifi Blend Fund
|Listed Equity||SEBI AIF Cat 3|
About the AMC
- Unifi was established in 2001
- Sarath K. Reddy, CIO & Founder prior work experience- started his career with Standard Chartered Bank.
- Narendranath K., Executive Director & Cofounder, prior work experience- with a leading non-bank finance company.
- G. Maran, Executive Director & Cofounder, prior work experience- Alpic Bank of Bahrain & Kuwait Finance Ltd.
- Sandeep Reddy Member BOD
- Christopher Vinod Executive Director & Cofounder, prior work experience- was with Navia Markets Ltd.
Investment Philosophy (for firm)
- Our thematic investment styles are designed around niche investment opportunities that exist in the Indian capital markets.
- Unifi is essentially a value investor in growth businesses.
- We believe that stock performance, particularly in mid and small firms, needs a catalyst; and often the best catalyst is an attractive price combined with growth.
- Unifi believes that both micro (firm level) and macro risks are critical in determining outcomes. We carefully evaluate the fundamentals of each business that we own, and in addition ask ourselves if the prevailing and expected conditions in the economy will act for or against our interest
Unifi High Yield Fund
Unifi High Yield Fund (HYF) is a discretionary fund focusing on event arbitrage and fixed income investment opportunities in capital markets with an endeavor to generate net post tax returns of 3% p.a over the rate of inflation (CPI). The objective is to consistently generate superior compounded annual returns than conventional fixed income instruments with uncompromising emphasis on capital preservation
Unifi HYF’s core investment strategy is to diligently find the pockets of opportunity that are constantly created by the ebb and flow of economic trends, corporate actions and human emotion. We closely monitor a wide range of asset classes and devise simple methods to continually access the market’s evolving opportunities, always mindful of probable scenarios that could surprise us. Typically, majority of the portfolio is invested in meticulously evaluated fixed income instruments that form a bedrock providing stable yields without considerable market volatility. The balance part is opportunistically invested in event arbitrage, structured high yield credit, and very selective directional deals to enhance the overall returns to the desired level.
Event Arbitrage Opportunities emerge from corporate events like mergers, acquisition, buybacks, regulation triggered / voluntary open offers made to the public by controlling shareholders, company delisting, declaration of special dividends etc. The risk- return pay-off in most of such deals is deal-specific and has limited correlation to market cycles
Nominal and High Yield Debt The focus is on opportunities in the AA to Investment Grade segment to optimize after tax yields while balancing risks. Typically, all debt investments are made with Hold to Maturity (HTM) mindset but some of it could be traded opportunistically to maximize capital appreciation or minimize risk.
Unifi Green Fund
The idea of a vibrant Green economy, brought about by the looming threat of climate change, has been identified as a key theme that we currently believe will transform industries and create enormous opportunities for investors.
“Green investments refer broadly to companies that operate primarily in the renewable energy, clean technology and environmental technology space. These would include companies that provide products and services offering solutions to environmental problems or that improve the efficiency of natural resource use.
The Fund will focus on investing in companies which would provide the support infrastructure for a “Green Economy” This would include manufacturers/producers of renewable energy systems , organic chemicals, emission control products, energy efficiency products, water & waste management solutions. As this is an evolving theme newer business models are expected to develop during the course of time. Unifi’s key strength has been its ability to identify the next generation of winners from the small and midcap space. In continuation of this strategy Unifi would primarily focus in the small and midcap space to identify companies which fit into the Green theme.
The Universe of Companies would be broadly selected from the following sectors:
1. Renewable & Alternative energy
2. Energy efficiency
3. Water infrastructure & technologies
4. Pollution reduction
5. Waste recycling and management
6. Environmental support services
7. Green Chemicals
These sectors are only indicative of our current thinking and it is entirely possible that as our research progresses we might look at companies beyond these sectors. But in all cases the Green theme would be the underlying basis for selection.
Unifi Blend Fund
Unifi Capital actively manages seven bottom up equity strategies that sift through opportunities across the breadth of the markets. Across the funds, the mandate is to participate in opportunities that arise from a mix of emergent themes, corporate actions and of course attractiveness of core fundamentals. The objective of all the respective funds under management is to deliver superior risk adjusted return from an absolute perspective.
The Blended Portfolio Strategy cherry picks from across the portfolio of companies that Unifi manages across each of the seven distinctfunds. In effect, the endeavour is to invest in “the best of our best” andreduce the investor’s switching cost and effort in migrating between best opportunities at any point of time.
Value creation requires a mental model which goes beyond the obvious. It requires a meticulous mind-set which is able to sift through reams of information and assimilate only that which is relevant in identifying value accretive opportunities. Metaphorically this could be compared to searching the proverbial needle in a haystack. This fund’s investment strategy will be to pick the best opportunities from the following themes.
Spin Off: In a single corporate structure with multiple businesses, the sum of the value of the separate parts is often less than that of the whole. A de-merger of disparate businesses, unlocks the financial and management bandwidth required for the respective businesses to grow. Spin off fund invests in situations that offer great scope for the businesses to realize their full growth potential and attract commensurate market valuation.
BC-AD: India’s economy has a high proportion of unorganised businesses which are estimated to account for about 35% of the GDP. As the economy grows in size from the current $ 2.6 Tn to $ 5 Tn over the next decade, it will traverse certain social, technology, scale, legal, taxation and regulatory changes. These changes are likely to challenge the current business models of unorganized players in certain sectors. As a result, well established organized players in such sectors will gain market share along with improving margins, potentially generating very high earnings growth. The BC-AD fund has been structured to benefit from this imminent migration of market share from the unorganised segment to organised players.
DVD: Few segments of the market tend to be mispriced in spite of visible growth prospects, resulting in such stocks trading at a deep discount to their intrinsic value. Reasons could vary from inadequate understanding of a business by most analysts, low relative market cap and liquidity or the lack of correlation to benchmark indices. DVD invests in such businesses and exploits market inefficiencies.
HoldCo: Many holding companies are run as group holding companies rather than strategic investment companies. This results in a perennial discount in their valuations, but such discounts are not a constant. The Holdco fund identifies strong underlying businesses and looks for massive valuation discounts that are likely to narrow due to changing regulatory landscape and from value convergence in a rising market.
APJ 20: As always, markets fancy few sectors that have done well in the past ignoring the rest. Of the sectors which are less understood, few such as speciality chemicals& precision manufacturing have become globally competitive and are privy to an expanding market opportunity. APJ20 invests in firms that have evolved and are in a ripe position to benefit from such growth prospects.
Green Fund: The investment focus of the green fund is on companies which provide products and services that help in reducing the carbon footprint in the environment and/or result in more efficient use of natural resources. Within the context of this strategy, the sectors that have been identified for creating the portfolio are – emission control, energy efficiency, water management and waste management.
Insider Shadow Fund: The Insider Shadow Fund invests in companies which have repurchased their own shares or where its promoters have acquired additional shares at market prices. Such an action demonstrates their conviction on company’s growth prospects or inherent value not captured in stock price at that point. The proposition is to gain from the eventual balancing of the value-price mismatch in the market.
The fund’s investment universe would include the diverse investment opportunities within the following mentioned funds at any specific point of time: SPIN OFF, BC-AD, DVD, HOLDCO, APJ20, Green fund and the Insider Shadow Fund.
The fund’s investments will be majorly concentrated in small and midcap space wherein it is difficult for “institutional” type of capital to invest and where Unifi’s relatively smaller size helps us to focus in niche areas of the market.
Topic/Title-Signal v/s Noise
Media platform name- Unificap (youtube)
Global market perspective, compared US market with Indian market, answered questions related this unprecedented situation.
- What’s the average number of positions your fund holds? How long do you hold a typical position? What is the level of portfolio turnover?
- Is your fund more suitable for taxable or tax exempt investor?
- What are the criteria for picking up the funds for Unifi blend fund, or how do allocate amongst the various funds? Is it Dynamic or static?
Peer review – Shivani Kadam
Date – 11th May 2020.