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Fund Snapshot

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About Fund Manager

Alok Agarwal, Head – Quant & Portfolio Manager

Alok has over 21 years of experience in Finance and Markets, primarily in equity research and fund management. He has worked with PGIM India AMC, where he managed their flagship fund and headed their Offshore Equity Desk. Alok has also worked with Deutsche Asset Management, KR Choksey Shares & Securities, E-nxt Financials Ltd and Pinnacle Academy. He holds a degree of M.Com and MS (Finance) & has also completed CA, CFA & CMT.

Deven Ved, Co-Fund Manager, Quant

Deven has over 17 years of diverse business experience in financial programming and modelling, program management, shareholder reporting and consulting. In his previous role at HDFC Ergo General Insurance, he spearheaded the launch of automated underwriting rule engine, enabling instantaneous policy issuance. Deven’s professional experience also includes working with financial institutions like Bharti AXA, Tata AIA Life and Deloitte Consulting. He’s highly analytical in his approach and holds a Post Graduate Diploma in Actuarial Science and Bachelor of Science Degree in Statistics from St. Xavier’s College, Mumbai.

Investment Objective, Philosophy & Strategy

Investment objective:
To generate long term risk adjusted returns.

Philosophy & Strategy:
A High Risk High Return oriented strategy where capital allocation is as important as stock selection and which aims at generating long term return by investing in companies with Market Capitalisation of 4000 crores and above, using data intensive research driven investment approach, to identify companies based on various parameters such as growth, valuation, quality earning and balance sheet health.

INVESTMENT PROCESS

Stock Selection:

  • Market Capitalization Cut-off: INR 4,000
    Crores
  •  Investible stocks have to pass a stringent system of eliminating value destroying factors & are sometimes vetoed based on risk and fundamental forensic analysis
  •  Over 50 Quantified fundamental parameters and their combinations used for screening of investible universe
  •  Highest Ranked Stocks based on points filtered

Capital Allocation :

  • Portfolio on an average holds 25 stocks-30 stocks
  • Weight per stock may range from 3% to 6% @cost, exceptional stocks may get an allocation of 10% @cost
  • Ranking system optimizes stock to be held in the portfolio and creates
    allocation for the same

Risk Management:

  • Prohibitive Risk
    • Quality Filters
    • Negative Marking for Unfavorable factors
    such as Balance Sheet ratios
  •  Participative Risk / Exit Strategy
    • Daily change in Rank / Score of Individual
    Stock (Using Fundamental Data)
    • Draw-Down / CAGR nonperformer
    • Multiple rules based on above scenarios
  •  Operational risk minimized using automation of
    processes

Unique Feature

  • Every fundamental is stated objectively and supported by evidence.
  • Treating markets as evolving rather than predetermined. So there is no subjectivity nor prediction.
  • Outlined selling guidelines
  • Recognizing market reflexivity
  • Justice to the concept comes second to justice to the Portfolio.

Growth:

  • Growth greatly exceeds the cost of capital.
  • The growth that is constant and ongoing
  • Many basic factors modify growth
  • Negative marking if growth diverges much or worsens

Valuations:

  • Price to Earning or Price to Cash Flow is how value is determined.
  • Valuations are adjusted for firm quality
  • The valuation is also modified to reflect the firm’s expansion.

Quality & Risk Management:

  • Selection is less significant than rejection.
  • Strictly negative ratings are given for poor items on the balance sheet, but positive marks are not given as this is required and anticipated by an investment applicant.
  • Additionally, it enables us to eliminate improperly managed businesses that ultimately prove to be CAGR KILLERS.

Market Cycle:

  • Whether there is or is not a profitable market cycle
  • The chances of success grow when the markets value a stock.
  • The previous performance of a stock’s downturn and volatility

Object-oriented method investing:

  • Each stock is approached objectively.
  • Having an objective method for investing reduces greed/fear/hope.
  • To generate CAGR, focus on discipline and data.
  • Back Tested for over 21 years across multiple market cycles.
  • The ability to scan over 2000 stocks daily in search of a winner.
  • Attempt to outperform the relevant index over the next 3-5 years.
  • The churn ratio is 0.67.
  • The typical cash level is 10%.
  • Active portfolio management that is focused and unbiased.

Selection of security type:

Three factors influence the selection of equity stocks for investment:

  • The fundamentals of the company, as reflected in reported numbers.
  • Research into investment strategies for various market cycles.
  • Risk-to-reward ratios.

Portfolio Design:

25-30 stocks on average (Additional investments would be managed as a separate Portfolio).

Benchmark selection:

Because our investible universe has an average market capitalization of Rs. 4000 crore and above, and the last stock in the BSE 200 index also has a market capitalization of around Rs. 4000 crores, we have picked the S&P BSE 200 index as our benchmark.

Preamble – 

In today’s financial world, it is considered that identifying the & quota right stock & right theme sector, cycle & quota is the key to any successful investment plan. Even the most seasoned investors are susceptible to biases inherent in the investment process. As a result, alpha generation is uneven.

• However, we feel that developing a highperformance portfolio entails far more. Stock allocation, relative ranking in the portfolio, timing, as well as risk management, are all critical components of the alpha creation process. We believe in a robust data the driven research process that takes into account all sources of alpha creation completely, which aids in the development of an unbiased and disciplined investing methodology – a key to successful and consistent investment outcomes.

Alchemy Ascent –

strives to create a constant & quota; high alpha & quota; investment strategy that builds a portfolio to generate consistent outperformance over the long term, utilizing an objective, back-tested, and data-driven methodology free of biases.

Why is Alchemy Ascent important?

  • All fundamentals are stated objectively and supported by data.
  • Respecting markets as evolutionary rather than predetermined. So there is no subjectivity and no prediction.
  • Selling guidelines have been established.
  • Market reflexivity must be respected.
  • Justice for the Portfolio comes before justice for the concept.

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