Wealth Company has kicked off its SIF vertical called WSIF with two fund launches: WSIG Equity Long Short Fund and WSIF Equity Ex Top100 Long Short Fund.
Both funds will have 3 components in their portfolios, designed to maximize alpha while managing risk:
- The core 60% will be mega trends driven compounderstocks – the long only portion of the portfolio
- Next will be tactical short positions upto 20% of portfolio – these will be short term opportunistic plays to either maximize alpha or hedge the portfolio as deemed necessary
- The last will be tactical long positions upto 20% of portfolio – use of futures and options in this portion is designed to maximize alpha from near term opportunities that look attractive.
Chinmay says the portfolio strategy will depend on the market environment – and F&O strategies will be employed accordingly either to maximize alpha or to limit downside.
Chinmay’s team will employ a probabilistic framework to enable portfolio strategy – a thought which is especially relevant in these times when geo-political events are deeply impacting our macros and our businesses.
His thought process is that peak bad news on the Gulf situation and therefore oil will likely happen within the next 1-2 months – that is the highest probability outcome. On prices, his view is that current prices are factoring in the highest probable outcomes as decided by the market– so if prices are at $100 now, one has to assume that this is the fair price for the circumstances we find ourselves in.
The team also has a bubble detection framework in place which seeks to identify tell tale signs of bubbles forming at a market level or market segment level or sector level, so that the fund house can adequately safeguard against becoming a victim of a bubble that pops.
Chinmay highlights the case of large FMCG companies –whose valuations he regards are in bubble zone – not so much from a historical context but from the perspective of slowing growth and increasing impact of disruptive distribution and regional competition. Bubbles don’t need to always crash – they can go through extended time corrections until the froth disappears.
Expect both portfolios to have between 30-60 stocks across long and short positions. The Equity Long Short will be more large cap focused while the Equity Ex Top 100 will be mid and small cap focused.
Chinmay is training his team to think and act as data analysts. Expect this team to be very data driven in its process of stock selection and strategy execution. Data rationality over views is what Chinmay is building as a key differentiator for WSIF.