Anita opened her mailbox: there it was her monthly PMS report. She opened the attachment, scrolled down to the performance and was met with disappointment. Another month of negative returns. If only she had stuck to investing in fixed deposits, everything would be so much easier. If performance is worrying you, the way it’s bother Anita, then we have something special in store for you.
Here’s a behind the scenes look into what we look at in a PMS portfolio every month.
Business Fundamentals
Performance is an intuitive and powerful metric to track. In fact, it’s possibly one of the best metrics to study in portfolios that are more than 3 to 5 years old. But, it does not reveal everything your manager needs to know about your portfolio.
The first thing we check is to see if the businesses in the portfolio have fundamentally changed. For instance, at the back of the war and rising oil prices in March, you would want to know if any of the businesses are reliant on oil and natural gas for production or use petrochemical byproducts in their manufacturing process.
At ithought, we track many businesses and see if their fundamentals align with valuations. This is how new ideas enter an investor’s portfolio!
Market Environment
As managers, we then bring our attention to how the market is doing. We might ask questions like:
- Where are FIIs selling?
- What are DIIs buying?
- Is the market scared or optimistic?
- What concerns are business owners voicing?
- Are businesses filing for more IPOs and OFS now?
The market environment determines the pace of investment and the levels of cash.
As contrarian investors, we’ve found that the best opportunities show up in months where the market is despondent, liquidity is weak, and investors are scared to bet on the next set of winners.
March was one such month for us. When we see opportunities like this, we reach out to investors to make sure that they don’t miss out on what the market has to offer. In these kind of circumstance, performance will not support our investment thesis. But valuations do, and that determines what investors like you can achieve in the long run.
Risk Adjusted Returns
Our long-term aim for every portfolio is to deliver returns that are appropriate for the product, beat inflation, and adjust well for risk. This ensures that you end up in the right product with the right expectations. When we bring risk into the equation, performance then comes at a fair price for the investor.
We invite you to experience the ithought way where you orient your investing towards opportunities, risk management, and performance.
