Initiating ARDEKO Model Portfolio on Labh Pancham Eve
Hello Everyone,
A very happy Diwali and Prosperous New Year to you and your family from Team ARDEKO!!
On the auspicious eve of Labh Pancham i.e. 1st November, 2019, we would like to initiate the concept of ARDEKO Model Portfolio. This portfolio is starting out at 100 and will be a representative of the returns of our investment strategies. The entry prices are as on end of day 31st October, 2019 and we will report monthly changes in the same with key actions and highlights regarding the same.
We are starting out with 3 model styles: 1) Conservative, 2) Balanced and 3) Aggressive. The Conservative Style has the highest debt allocation to ensure low volatility of returns. The Balanced Style has a fair balance between debt and equity and aim is to generate returns without assuming higher risk. The Aggressive Style is bent towards equity and will be relatively more volatile. Pl find below the basic portfolio construct for each style.
| Portfolio Construct | Aggressive | Balanced | Conservative |
|---|---|---|---|
| Equity MFs | 31.4% | 28.0% | 24.0% |
| PMS/AIF | 24.6% | 12.0% | 0.0% |
| Debt MF | 12.0% | 20.0% | 31.5% |
| Alternates | 3.0% | 5.0% | 3.5% |
| Cash | 29.0% | 35.0% | 41.0% |
| Total | 100.0% | 100.0% | 100.0% |
On the debt front, we would have a mix of duration and credit based on the market conditions. On the duration front, we are mindful of a fiscal miss but would want to start building the long end of the portfolio at post tax lock-ins closer to 7%. We will be adding debt alternates depending on upcoming opportunities. We would be holding 50% of the debt allocation in cash for now. This will get gradually deployed over the coming months.
On the equity front, we have seen several steps by government over the past 3 years which favor formalization, industrial capex and a mean reversion to double digit earnings growth. While valuations are expensive for mega/large caps and in particular blue chip/quality companies, we see various pockets of value in the market. We are holding 20% of the equity allocation in cash and would prefer to be invested rather than be worried about that 5% correction. There are macro and micro risks which we will keep discovering the more we all read, however would prefer to address it with a tactical shift in case an unexpected event plays out.
To keep things simple on Cash front, we are considering 7% per annum pre-tax return, similar to that of IDFC First Bank’s Savings rate. In practice, one can choose a combination of Liquid and Arbitrage schemes to optimize the return.
All dividends and interest pay-outs will be re-invested in the portfolio in the same allocation. Please note that a client’s portfolio return may differ from our model portfolio return on account of differences in timing, legacy holdings and so on.
Kindly get in touch with us on admin@ardeko.in in case you want more details on this front.
