Moat and Special Situations Portfolio

OBJECTIVE


Moat & Special Situations Portfolio (“MSSP”) was launched with an objective to generate capital appreciation by investing in companies that are Moats or Limited Moat businesses or in Non-Moat businesses as special situations with key emphasis on capital preservation.

The portfolio is managed as an absolute return oriented portfolio which is achieved by taking active cash calls when markets are expensive and when there aren’t enough opportunities to invest in.

Focus on Quality, Valuation and absolute return helps in generating superior risk adjusted returns.

Investment strategy

Focus on delivering superior risk adjusted returns while mitigating behavioral biases. Thus suitable for an investor who seeks equity like return but with lower risks on his investment portfolio.

Asset allocation

Follows strict Quality and Valuation discipline which defines the asset allocation. In an expensive market when opportunities are limited the portfolio would automatically have lower exposure to equity and vice versa.

Focussed Approach

Not more than 25-30 stocks with average 70% weights in Moat/Limited Moat companies

Hurdle rate

13% CAGR with high watermark. 25% Performance share on returns above the hurdle rate and is taken at maturity of the product and not every year on notional return.

Maturity

39 months with exit load of 1.0% if redeemed before maturity

Benchmark

Average of BSE 500 and BSE Midcap

Access to Investment Team

Regular Quarterly Review with Investment Team and access to Fund Managers whenever required.

Risk Control

Maximum stock weight 10-12% and sector weight 30%

Account Structure

Pooled accounts for purchases and sales of securities. New Bank account and Demat account to be opened in the name of first holder. Power of attorney to be signed with PMS partner and custodian

Portfolio & Accounting Information

Monthly detailed report with Performance appraisal, transactions date, price of purchase/sale, quantity, ledger accounts. Monthly Balance Sheet and P&L provided. At the end of financial year, audited statements are provided for tax purposes.

Skin in the Game

Meaningful portion of the assets comes from our Promoters and Shareholder’s capital.

The strategy strongly focuses on controlling risks by avoiding investments  in companies which have high exposure to three types of risks –

i) Business risk

ii) Balance Sheet risk

iii) Valuation risk

In order to provide superior risk adjusted returns, the portfolio is invested in those companies which provide high prospective returns over the estimated cost of equity.

The Portfolio Manager believes investing in securities with prospective returns lower than the cost of equity (usually ~13.5% for large caps and ~17.5% for mid/small caps) increases the chances of a “permanent” loss of capital. The Universe comprises of such companies which have a moat advantage in their businesses. However under special situations, the portfolio might be comprised of companies which are No-Moats but enjoy cost leadership in the industry or are available at deep valuation discounts.

The decision to add a stock in the portfolio will always be based on the potential risk adjusted return a stock can deliver as compared to the long term trend of Sensex.

Here’s what our clients have to say about our PMS services

In the last 2 years, Jinal Sheth & Rohan Samant, who manage our Equity Portfolio, have adopted a disciplined approach to investing in equity. They’ve built a vast data bank & created a refined process to throw up valuation bands for companies. We believe in Multi-Act’s investment philosophy. They have an excellent research team that closely tracks a universe of companies & invests in high-quality businesses with a good track record. We are extremely happy working with them & have no reservations in recommending them to anyone who needs help with preserving their valuable capital and getting adequate risk-adjusted returns.

Vinod Shah
Promoter, Chanakya International- A leading international fashion house

 

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