November 2013

All investors are happy investors

2013 has been an eventful year for investors. We started the year with an aim to protect capital as we believed it would be extremely challenging to trade through this period. We have witnessed extreme currency movement of more than 30% and Interest rate movement on the negative side of more than 3%. To make matters worse we saw volatile flows due to US tapering news and fiscal cliff. In this volatile time our focus on top end quality business has played out beautifully. It gives us great pleasure to announce that we are on the verge of ending 2013 with positive returns in all the three strategies and all our investors have made money irrespective of their date of entry. Average returns have been more than 12%, which is way above what market has offered. To date both mid cap and small cap indices are deep in red.

We have already witnessed a structural breakdown where growth is bottoming out at 4.50%. In our view we would love to slightly tweak the portfolio to take advantage of the expected cyclical upturn. This may increase churn in portfolio by a little bit. We would like to buy businesses with some mega themes which may play out in the next 3-5 years. We would request all of you to expect higher churn where we may end up selling some of the names which had become mainstays of our portfolios. In the last month we have replaced HDFC Bank with Sundaram Finance in India Equity. In our view Sundaram finance will be in better shape to take advantage of upturn with their equipment finance and vehicle finance book. In India Dedicated we have replaced it by adding weight to Kotak Bank and buying Cholamandalam Finance. Cholamandalam Finance is a part of Murugappa group which is one of the most respected business groups in India.

It is our commitment to remain focused on the high quality space and as such we will continue to identify opportunities therein.