Series 35 – Key highlights of our Q3 Quarterly Letter 2023
October 13, 2023
The previous week’s series highlighted the importance of our Quarterly Call. This week, we aim to succinctly outline the key takeaways from our Q3 Quarterly Letter, setting the stage for our upcoming Quarterly Call on October 14th at 09:30 AM.
Key highlights of our Q3 Quarterly Letter (2023) –
Since Inception Jan 2017, Our fund has delivered an IRR of 20.1% against Nifty which generated 13.95% over the same period.
From the start of the fund, we maintained that Nifty would be the most consistent and the hardest index to beat, and through our consistent outperformance against the index, we have effectively generated alpha for our investors.
We believe Nifty will remain the toughest index to beat throughout this decade
Market-cap based investing, rooted in regulatory categorization of large, mid, and small caps, aims to balance safety and risk in India
Interestingly 5Y rolling return of large caps over the last 20 years is 2% higher than that Small Cap
During times of Increased Volatility, through a large cap draw down of 15%, small cap index experiences 65% drop in liquidity
Despite lacking a significant risk premium over time, small caps poses liquidity challenges during volatility, impacting investors.
Our priority has always been minimising drawdowns over maximising returns
Our fund positioning across market cap historically shows that market cap allocations has always been a consequence of managing liquidity in our portfolio. (Fig 1. in the Q3 Quarterly Letter)
Our small cap exposure increased materially when we saw structural growth in the companies with RoE expansion (Fig 2. in the Q3 Quarterly Letter)
As we speak, we are trimming positions in mid and small caps and directing new investments to large caps where we believe growth and valuations are reasonable.
Financialization as a theme- we could compare India’s market cap today to the US in 1989, subsequently seeing its market cap by 3.5x in 10 years
Tax Payer base can be looked at potential market for financial businesses. Last 4 years there has been absolute growth of 12% in the number of tax payers in India (Fig 3. in the Q3 Quarterly letter), and during the same period, staggering growth in demat account opening (220%) and Investment in Mutual Funds (71%). (Fig 4. in the Q3 Quarterly Letter
What we imply is that despite limitations, there is substantial opportunities for growth and we at Itus Continue to buy structural growth at reasonable price.
We continue to focus on businesses run by leaders who allocate capital well, grow their market share and also have market leadership.
We have also attached the link to our Q3- Quarterly Letter for your quick read-
As part of our continued commitment to keeping you well-informed, we are fully dedicated to our SIP program. This enables investors to add funds to their portfolio in a disciplined manner. If you are interested in learning more about this program, drop an email to your dedicated relationship manager [email protected].