Founder’s Folio

August 2021

Hi there! This is Chinmay Kulkarni, CEO and Founder of Cambridge Wealth. We’re a Wealth tech Investment Firm based in Pune, India. Founder’s Folio is our way of giving you a real insight into the thinking process that goes behind key investment decisions. The idea of putting out my portfolio stemmed from the fact that trust & transparency is a huge issue today. Not many are comfortable with practising what they preach. And so, by putting out a Real portfolio, we want to give you a sneak peek into the kind of strategies that we create and deploy. In short, put our money where our mouth is. Please note that in investments one size does not fit all, our algorithms and counsellors help you discover the right options and understand the right quality for your investment journey.

Portfolio Blueprint

• The top 1000 profitable companies have witnessed their profit pool increasing from INR 6.5 trillion at the end of Mar’20 to INR 10.8 trillion by the end of Mar’21. This indicates the fact that the equity market rally over the last year has been led by strong corporate earnings growth

• With the sharp run-up in Mid and Small-cap indices, current valuations are not extremely expensive but have reduced the risk to reward ratio. Value strategies provide a favourable risk-reward at this point with potential alpha generation from Multi caps, however only in a staggered, risk-managed way

• For someone who wants a more sustainable fixed income quality portfolio, about ~70% — 80% of the fixed income portfolio should be biased towards high quality short to medium term accrual strategies juxtaposed with high-quality roll down strategies

• To enhance the overall portfolio yield, investors with a medium to the high-risk profile can consider 20% — 25% allocation of the overall fixed-income portfolio to select high yield strategies, MLDs and NCDs

• With regards to this Portfolio, I am a Long term Investor who is optimistic about India’s growth prospects, especially for industry leaders who are consolidating well. I have about 85% exposure to Equities which includes Indian(65%) and International Equities (20% U.S and China)

• While its a known fact that everyone (or atleast most of them) has made money in the past 12 months i.e., Aug 20’-Aug 21’, but what’s not discussed is that only a few have made money for their investors in the past 24 months i.e Aug 19’-Aug 21’ including the crash. When deciding on a portfolio, please don't let short term returns cloud your judgment

• Another point is resilience. When the mighty fall (as they do every now and often, it's a great time to see who was resilient to the fall. Take a look at the big dip (Market crash) in March 2020. Notice how the nifty has crashed and burned? In contrast take a look at some of our Strategy options, where the correction has been less than Nifty, and recoveries, better.

Founder’s Folio

What do we see moving ahead? (Investment Outlook)

• What goes up must come down?

Case 1: If a subsequent covid wave hits us and there is a market sell-off from the economic shock, we’ll see the equities go down

Case 2: If the third wave does not hit us and the economy is not affected as much in the short run, we’ll see limited gains from earnings since there has been a run-up. Therefore, the markets might show signs of stagnation for a short to medium term

Case 3: If equities continue to do well in terms of earnings and covid does not play havoc, the Capex cycle kicks in, contributing to further growth. In this case, when demographic dividends continue to fuel equity earnings we’ll see growth, although not at the level at which we have been seeing

• Whichever case may come to reality, the best way to balance your risk-reward is to allocate to selective high-quality equities in a disciplined manner, over the next 12–18 months in a way that does not expose you to all of the market shocks while exposing you to market opportunities, this what we are going to do in the Founder’s Folio as well. The secret to avoiding the emotional trap of crumbling patience when markets are not rewarding and even capital starts eroding is long term investment orientation

• RBI is expected to maintain balance amongst sufficient liquidity, rising inflation concerns and growth implications. Interest rates may gradually increase due to RBI’s gradual normalization of liquidity and may remain volatile due to fiscal expansion, inflation concerns and global factors. For your Fixed Income or debt portfolio, it makes sense to stick to Rolled down and Barbell yield strategies to mitigate interest rate risks and play it smoothly in the long run. Also consider high-quality credit strategies, even if they come with ‘risk’ in their name

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