Crea%ng

and advising on wealth

Hansi Mehrotra, CFA
Crea%ng wealth

Finance is only industry where someone with a person with no educa%on/

qualifica%on, no background, no experience can VASTLY OUTPERFORM someone
with the best qualifica%on, best background and best experience.

Inves%ng is not about WHAT you know, but HOW you behave. And behaviour is
hard to teach. It’s hard to measure.

Inves%ng is not a study of finance. It’s a study of human behaviour – how people
respond to incen%ves. So it’s more useful to read psychology, sociology, history,
poli%cs…even literature!
Our personal histories maTer
Our personal histories maTer
Our personal histories maTer
Our personal histories maTer
Preven%on is beTer than cure
Preven%on is beTer than cure
Preven%on is beTer than cure
Preven%on is beTer than cure
Preven%on is beTer than cure
Preven%on is beTer than cure
Preven%on is beTer than cure
Preven%on is beTer than cure
What risk are you trying to avoid?
What risk are you trying to avoid?
Markets are about economy/profits?
Markets are about economy/profits?
Markets are about economy/profits?
Markets are about economy/profits?
What’s your %me horizon?
What’s your %me horizon?
Recent market experience
Recent market experience
Recent market experience
Likely learnings?

?
Your biggest risk is you
Advising means you’re an expert?
Investment beliefs
•  Returns are made up of –
–  Market return (beta)
–  Manager excess return (alpha)

•  Alpha can only be delivered by ac%ve management. If alpha is not

available, might as well go passive

•  So, we need to work out –

–  Can managers add value?
–  Do managers add value?
–  Can we find and invest in them cost-effec%vely?
Fund research assump%ons
Opinions on methodology Opinions on inputs
How to filter universe? Data/factual informa%on – benchmarks, peer
groups etc
How to assess alpha poten%al ie which qual/ quant
factors to use and what weights to apply? Fund manager interviews – what factors to focus
on, skill level of interviewer etc
How to assess alterna%ves?
Opera%onal due diligence – depth, process etc
How o\en to review funds?
Decision to do in-house v get external inputs
When to replace funds? How to know if under- depends on alignment of views on methodology,
performance was skill or style issue? compe%%ve advantages vis-à-vis costs, conflicts of
interest etc
What is the appropriate fee level for each asset
class?
Investment vehicles
Direct Managed (PMS) Managed/Uni%sed
Pros Control, tax, low cost Semi-control, tax No control, quant research
available
Cons Need skill/%me to manage High uncapped fees, no research Low minimum, high fees but
available on PMS, high minimum regulated, research not good
amount

Long-term returns
- Equi%es Index likely to do 12-15%pa Index +/- 5-8%pa long-term Index +/- 2-5% pa long- term
Skill will drive +/- Fees 1.5-2%pa + Fees 1-2.7%pa (direct vs
10- 20% of upside commission units)

- Debt Govt bond likely to do 1-2%pa Govt bond +/- 2-3% based on Govt bond +/- 2-3% based on
above CPI interest rate/credit calls interest rate/credit calls
Fees 0.1-0.5%pa Fees 0.5-1.5%pa
Money Management India
MMI intends to help investors make beTer
decisions through ‘qualita%ve’ content…

…spanning educa%onal, thought-leadership, and

research con%nuum…

…focusing on investments and wealth

management.

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