When the scaffolding fell down on a bridge in ancient Rome, the bridge engineers were forced to stand underneath it. Because their lives were at stake, the engineers allowed no room for error. In order to ensure safety and endurance, engineers ensured that the bridge’s load carrying capacity was substantially higher than the actual or expected loads. As a result, they designed their system with a higher margin of safety.
Our portfolio design follows a similar philosophy. Our goal is to buy long-term business models while minimising capital losses, which is why we prioritise buying at the right price and value. We may construct a margin of safety into our portfolios this way, ensuring that they are protected even if our market conditions deteriorate Estimates are incorrect are on the wrong side of the law.
|Type of Fund||A Category III, Alternative Investment Fund|
|Portfolio Strategy||A portfolio of ~25 companies which meet the criteria of capital efficiency, low leverage and low valuation|
|Investment Style||A cap agnostic fund predominantly invested in emerging businesses|
|Fund Managers||Mr Kenneth Andrade|
|Investor Category||Individuals, Corporate Investors, NRIs, Foreign Nationals, FPIs (excluding US and Canada)|
|Minimum Investment||INR 1 cr.|
- Old Bridge Capital management emphasizes buying at the correct value and price.
- They prioritize buying enduring business models with an emphasis on limiting capital losses.
- They follow a self-disciplinary screening approach to investing.
- They also believe in paying close attention to valuation for optimizing investment returns.
Focus on locating companies at the beginning of a cycle. The underlying businesses in the portfolio would exhibit sound financial management and leadership qualities. The goal would be to find businesses in sectors that are consolidating.
We continue to be cautious of paying infinity prices for excellent firms and are leery of corporations taking significant financial risks. To do this, we focus on companies that are just beginning a cycle and are ready to be patient while they grow. Our portfolio selections’ low leverage and low valuations allow us to concentrate on risk management. The benefits come from markets and economic cycles.
The investing goal is to find businesses that exhibit strong leadership and financial discipline. The goal would be to find businesses in sectors that are consolidating.
Pay Attention To Supply-Side Economics Supply Is Consistent
- Capacity utilization
- Balance Sheet Growth
Demand Is An Extrapolation Of Past Growth Rates
Industry Capital Cycles: It is important to capture these cycles
- Anticipate v/s participate
Monopolistic/Consolidators of the Industry
- Preference for consolidating businesses
- Companies gaining market share with no change in capital employed
- Companies with the lowest cost in their industry
- Leaders at the end of consolidating cycle usually end up with higher market share and pricing power
Capital efficient business
- Companies that migrate upwards from a low RoE
- Look for capital employed to be controlled
- Cash flow positive nature of the business with low gearing
Low Financial Leverage
- Companies with negligible debt
- Businesses leveraging into an economic upcycle & deleveraging at the top of the cycle
- “Out of favour” businesses where the current value of the stock reflects its depressed earnings
- EV / Sales
- Market Cap / Cash Profit (Flows)
How does Old Bridge Capital Portfolio choose the companies to invest in?
Old Bridge Capital Portfolio targets low valuations and low leverage that will aid in focussing on risk management. Old Bridge studies the market and economic cycles of companies for choosing them to invest in. They look for businesses early into a process and are willing to be patient as they emerge.
How is Old Bridge Capital Management different from others?
Old Bridge Capital management differs from these three aspects:
- Management- Old Bridge Capital’s management is spell-bound. They have a track record of beating the benchmark every year since 2006.
- Strategy- The consistent strategy that Old Bridge swears by is of buying and holding policy. They also believe in maintaining a healthy margin of safety.
Experience- The team at Old Bridge has experience of 65 years in equity research. And has always achieved huge success individually
What is the portfolio strategy of Old Bridge Capital?
The portfolio strategy of Old Bridge is concentrated around specific segments of the economy. Old Bridge consists of a portfolio of 20 scalable companies in industries that fit into a valuation framework with a favorable risk-reward profile. They follow a buy and hold policy as a strategy.
What are the services offered by the portfolio manager of Old Bridge Capital?
The portfolio manager at Old Bridge Capital offers three types of services:
- Discretionary- Here, the Portfolio Manager will have complete discretion to manage, invest and reinvest the Client’s account.
What is the investment approach of Old Bridge Capital?
The investment approach of Old Bridge Capital is as follows:
- Owning a diversified portfolio of securities.
- Identifying attractive opportunities.
- Profit-making in low Capex scheduled.
- The low value of a business
- Emphasis and concentration during stock selection
What are the terms of redemption in Old Bridge Capital?
Following are the terms of Redemption:
- For exit within Year 1 from the date of each investment allocation-3%
- For withdrawal within Year 2 from the date of each investment allocation-2%
- For withdrawal within Year 3 from the date of each investment allocation-1%
What is the investment horizon for each investment allocation?
The investment horizon is for three years with complete discretion with the Portfolio Manager to wrap up and liquidate the portfolio early.
What is the investment objective of Old Bridge Capital management?
Old Bridge Capital Management aligns with the fastest-growing part of the economy and picks businesses that benefit from increased cash flows when it comes to the investment objective.
About Fund Manager
Mr. Kenneth Andrade ( Chief Investment officer )
Mr. Kenneth Andrade manages the investment process and leads investment ideation.
Along with over 30 years of experience in Indian Capital Markets, portfolio management, and investment research he has a formidable 15-year track record managing some of India’s most successful equity funds.
Kenneth’s experience in portfolio management includes the 10 years at IDFC Asset Management Company, which was ranked amongst the top 8 in the Mutual Fund industry in India, the Year 2005 to 2015. From 2008 to 2015, IDFC MF ranked as the fastest-growing mutual fund in India. At IDFC, Kenneth was responsible for the performance of a corpus of US$8 billion, as Chief Investment Officer. He was responsible for building the firm’s equity franchise and managed one of India’s largest equity funds by AUM. The firm’s flagship fund, IDFC Premier Equity Fund delivered a CAGR growth of 22.3% over the ten-year period.
- In a sector that is consolidating, align with effective capital and avoid market fragmentation.
- Concentrate your portfolio around the industry’s most lucrative value chain.
- The need for balance sheet discipline
Leaders amongst the laggards
- Consolidators with experience across cycles
- Dominant market share in their segment
- Unleveraged balanced sheets
- It should be the first off the block in the next cycle
Compounding the effect of Valuation & Growth
- Low growth and low valuation, if the former reverses, PEx will expand
- Visibility of growth, order books in place
- Have stayed away from crowded segments where valuations already discount expected growth
Focus On “What We Can Control” & Not The “Macros”
- Lowest cost operators in the Industry
- Survivors of the last capital creation cycle
- Lead market share growth
- Corporate Governance quantified through financial parameters
Current Strategy Themes
Manufacturing/External Bus. & Commodities
- Due to several challenges, the world’s largest manufacturer needs to contribute to the global supply chain.
- Utilize India’s specialized manufacturing sectors, which have become world leaders in cost.
- Because traditionally, they have been underperformers, valuations and business models in this sector have been disregarded.
- As mentioned above, businesses that use a backward value chain will continue to use a lot of energy.
- Utilities will migrate due to the changes and incremental investment in alternative energy.
- Businesses in the financial services and technology sectors are linked with pay growth.
- Due to the development of new business models and the recovery of the economy, the cash flow of the survivors will increase.
- Lowest borrowing rates ever
- Agri-products price increases
- The profitability of corporations is at an all-time high, yet valuations are still fair.
- The main force behind these firms, which plays into both of the aforementioned market categories, is social alienation
- Profitable industry, costly values, yet almost all of these businesses are seeing rapid expansion.
We concentrate on identifying businesses early into the cycle. The underlying companies in the portfolio would demonstrate leadership skills and have financial discipline. The endeavor would be to look for companies in industries that are consolidating.
Disclaimer: Investing Involves Risk. This document is for information purposes only and should not be viewed as a legal offering document or solicitation. Offers to invest in this fund are made only by the Discretionary Portfolio Management Services Agreement. Past performance does not guarantee future results and there is no assurance that the managed accounts will necessarily achieve their objectives. We do not guarantee any returns in the hand of investors not we take any sort of accountability for the performance of the scheme. The above-mentioned data is collected from the respected Fund house please verify the same at SEBI website.