Our plain and simple advice to our clients is as follows :

·  Continue to invest on a regular basis in two baskets (the ratio, i.e., the contribution to each basket, depends on your risk tolerance level). 

o Fixed income, i.e., FDs, bonds, debt mutual funds, etc. 

o Equity, i.e., mainly in diversified (so less risky) and direct (so no commission distribution to anybody) mutual funds. The majority of investments are in large-cap mutual funds (40%–50%), followed by Mid-cap, Small-cap, and Flexi-cap Mutual Funds (30%–40%), and direct stocks (15%–20%), which are relatively riskier.

·  Those who have already retired maintain the ratio between these two baskets on a regular basis based on their ability and willingness to take the risk. Rebalancing the ratio is the key for both types of investors (about to retire and already retired).

·  We will manage your direct stock portfolio and we will try to get returns over and above the NIFTY50 Index (irrespective of incremental cash inflows or outflows). 

·  The client may contribute to the fund intermittently. Returns will be computed based on the Time Weighted Rate of Returns (TWRR), so returns will be unbiased to cash in or outflow into the fund

·  We will communicate at the end of every month how your portfolio is doing with regard to the benchmark, i.e., the NIFTY50. In the same report, you can also track the performance of our shortlisted mutual funds. (Basically, your mutual funds also need to outperform the index over the period.)

As of now, we are managing two types of portfolios.

Focus-Five strategy 

·  Objective: Over a longer period, outperform the NIFTY50 by a wider margin by taking a company-specific risk.

·  Constituents: A portfolio consists of a small number of stocks (mainly large-cap but will also include mid and small-cap stocks).

·  Suitability: Suitable for clients with an above-average risk tolerance level.

·  The minimum contributionRs. 2 lakh.

·  The minimum incremental InvestmentRs. 1 lakh.

·  Suitable time horizon: +10 years.

NIFTY+ strategy

·  Objective: Over a longer period, outperform the NIFTY50 by not deviating significantly from the NIFTY50 index.

·  Constituents: A portfolio primarily comprised of the NIFTYBEE ETF (up to 80%), cash (based on future expectations), and a couple of large-cap stocks.

·  Suitability: Suitable for clients with an average or below-average risk tolerance level.

·  The minimum contribution: Rs. 50,000.

·  The minimum incremental Investment: Rs. 10,000.

·  Suitable time horizon: +10 years.


Potential conflict of interest


We only open all clients' accounts with Motilal Oswal Securities Ltd. (MOSL) because we find it easy to execute transactions on behalf of clients and share our own system-generated customized performance reports, which are unique and as per industry standards.

Thus, we must disclose our conflict of interest. Since technically, we are acting as a sub-broker of MOSL, and as we are generating clients and revenue for MOSL, MOSL gives us a commission. As per the ethical standards of the CFA Institute, we must either return this commission on a pro-rata basis to individual clients, or we can use this commission to purchase subscriptions or data services to improve our investment decision-making. Since our objective is not to generate a commission but to manage clients' funds to outperform the index, and since it is time-consuming to return the commission to the client on a pro-rata basis, we are using this commission to purchase subscriptions and data services that will add knowledge and information to make informed investment decisions. There is no disadvantage to clients since the client's portfolio performance will be based on returns computed after transaction brokerage and taxes (STT & other) and the annual maintenance fee charged by MOSL.


Fee for fund management

·  An annual fund management fee will be charged. After the completion of 12 months since inception or after the last payment of the Fund Management Fee

·  We will charge an annual 1% on weighted average AUM (asset under management, i.e., portfolio value) if the portfolio is outperforming NIFTY by 3%–10% (the absolute basis for the period equal to or more than one year).

·  We will charge an annual 2% on weighted average AUM if the portfolio is outperforming the NIFTY by more than 10% (the absolute basis for the period equal to or more than one year).

·  We will not charge any fund management fee unless we outperform the period by one year or more

·  Examples: A new client has started with an AUM of Rs. 2L in the Focus-Five Strategy on Jan. 1, 2022, or an existing client has paid the last Fund Management Fee up to Dec. 31, 2021, and by the end of Dec. 31, 2021, the client's net AUM is Rs. 2L: 

o If the fund outperforms the NIFTY50 by 5% and the fund's value after 12 months is 2.2L, the fund management fee will be: [(2L + 2.2L)/2] x 0.01 x [12/12] = Rs. 2,100. 

o But let's assume after 12 months (i.e., on December 31, 2022), the fund is not outperforming, so no fund management fee will be charged after 12 months. 

o However, let's say the fund outperforms the NIFTY50 by 8% after 15 months (i.e., on March 31, 2023), and the fund value after 15 months is, say, 2.5L. So the fund management fee will be: [(2L + 2.5L)/2] x [0.01] x [15/12] = Rs. 2,812.5 

o Or after 18 months, if the fund is outperforming NIFTY50 by 12% and the fund value is 3L, then the fund manager fee will be [(2L + 3L)/2] x [0.02] x [18/12] = Rs. 7,500.

Incremental Investment

·  A client may do a top-up at any time. Since returns will be calculated based on TWRR, they will be unbiased to the incremental cash in or outflow.

·  In the case of the Focus-Five strategy, a client may keep transferring a small amount (less than the minimum incremental amount). We will keep parking that amount in NIFTYBEEs, and once the value of NIFTYBEEs becomes greater than the minimum incremental amount, we will sell NIFTYBEEs and deploy the proceeds as per the model portfolio.

Withdrawal (full or partial)

·  The client may exit at any time, i.e., full redemption and there is no additional charge or exit load.

·  There is no charge or exit load on partial redemption, provided the minimum contribution required for the strategy is maintained.

Sudhir Kulaye, CFA


Call: +919819980951