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Word Wealth: How Shenoy Turned a Blog Into an ₹800 PMS

Yet just over nine years ago, Shenoy simply ran a blog, writing his thoughts on macroeconomics and its impact on markets and supporting it through subscriptions.

Shenoy’s story dates back to 1998, when as an engineering graduate he got into investing. “It was by accident,” he tells Mint. Shenoy was developing software to compete with Tally, the ubiquitous accounting package used by Indian companies, and so began studying corporate finance. By 2005, however, he had sold the business. Instead, he now wanted to develop software to help traders deploy algorithms in India’s nascent stock market.

“The first online brokerages emerged in the early 2000s, such as Sharekhan and Reliance Money. I felt the time for algo trading had come,” he says. In a few years, he changed course and developed algorithms that he and his partner would deploy themselves. “I moved to Mumbai in 2007, the day after the % collapse,” he says. “Our hedges protected us and even made us money. easy. At one point I went long in the market in a leveraged bet and lost a lot of capital. Why? Someone told me that shorting was not patriotic Moral of the story: Leave patriotism aside when making investment decisions,” he laughs.

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Market volatility and other problems, including his wife’s health problems, convinced Shenoy to quit the accessories business and leave Mumbai. He moved to Gurgaon where he started working for an algo trading company. “The business did well and the company eventually co-located on the stock exchange after I left,” he adds.

Separately, Shenoy was pursuing a new passion. “The 2009 financial crisis also underscored the importance of macroeconomics in determining the success of investments,” he says. “I started blogging about the macro and its impact on the markets,” he added. After seeing the growing interest in his writing, Shenoy decided in 2013 to work full time on his content. Again, there have been missteps along the way. “I was focused on Youtube videos in 2011, long before Indians could access cheap data and Youtube usage had skyrocketed. I was just too early,” he said. However, his writings attracted a significant following.

“In 2013, when I started full-time, I decided that unless I had my first hundred subscribers in a month, I would stop blogging.” Fortunately for him, readers answered his call. Shenoy earned a research analyst license in 2015, issuing stock recommendations and charging users subscription fees. Soon, however, readers wanted more than research and recommendations. “They wanted someone to handle the money,” he said.

This gave birth to Capitalmind, as a portfolio management service in 2017. But it wasn’t all easy at first. “The demonetization happened in 2017 followed by the 2018 budget which imposed a long-term capital gains tax. We saw a nasty levy of 20-25% at that time during our first year”. 2018 and 2019 continued to be difficult for the young portfolio manager. “Our custodian was IL&FS (which was also the custodian for most of the PMS managers. When IL&FS went bankrupt, we had to migrate our clients to a new custodian, ICICI Bank,” he explains.

That same year, Shenoy’s team developed a dynamic, algorithm-driven investment strategy that changed their fortunes. Shenoy explains this: “The momentum strategy was 50% cash in February 2020, before the covid crash. When the market rallied, it automatically bought fast-growing companies such as the pharmaceutical industry in May. Between March 1, 2020 and March 31, 2021, it increased by 61% (Nifty increased by 35% over the same period). The outperformance continued through October 2021.”

Capitalmind, however, is not just about momentum. There are three main strategies: momentum, multicap (the first strategy which was launched in 2017) and market index funds. “The last strategy is extremely simple. 66% are in a Nifty ETF and 33% are in a Nasdaq ETF. After overseas flows stopped in February, we replaced it with a Nifty 150 ETF,” he says. abolished performance fees. We believe they incentivize the manager to take risk,” Shenoy said.

The Momentum and Market Index portfolios, launched on March 5, 2019, generated CAGRs of 22.98% and 10.87%, respectively. The multicap portfolio was launched on November 3, 2017, close to a market peak on mid and small caps. Its CAGR since inception is only 4.41%. “This is after our fees. We calculate NAV with the same regulatory rules as mutual funds, which is unique among PMS, which typically only accrue certain fees at the end of a year,” explains Shenoy.

Capitalmind also has consulting assets of approximately 1,500 crores. “Some clients don’t need us to manage all of their money since they have other investments including mutual funds, stocks, fixed income, etc. that they run through the intermediary of a family office. We advise them on their overall portfolios and use our analysts and our quantitative process to help them take action or allocate appropriately,” says Shenoy.

In its core PMS business, it’s the momentum portfolio, managed by Anoop Vijaykumar, that really stands out and accounts for almost half of Shenoy’s AUM, at 370 crore. A different version of the momentum strategy is also available to users on Smallcase. However, the momentum portfolio has been underperforming since October 2021. It is down 12.8%, compared to 6.9% on the Nifty over the past six months to June 22. He is currently sitting on 50% cash. Much of Capitalmind’s future success will depend on its ability to recover.

But Shenoy thinks the nuts and bolts matter too. “We report a daily net asset value, and we have reduced custody fees and account opening times for new investors to 3-4 days. Our technology is also self-developed rather than ready-to-use. In the long run, there is more to investment experience than returns,” he adds. As he waits to enter a crowded mutual fund industry, this focus on client usability and Shenoy’s innate ability to explain macroeconomics and personal finance to the general reader. , may prove to be the differentiating factor he needs.

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