Performance Update for November, 2019

Hello Every One,

Please find below the first update of the ARDEKO Model Portfolio.

We had initiated the Model Portfolio on 1st November, 2019 under 3 model styles:

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.

The Balance Style has the highest return at 1.1% and is in line with the benchmark. The other styles have an absolute positive return but have narrowly underperformed the benchmark. We remain confident of the underlying strategies and portfolios.

Please find below the basic portfolio construct and return for each style.

ARDEKO Model Portfolio Performance for the month of November (1st Nov to 30th Nov)

Instruments/Asset ClassAggressiveBalancedConservative
Managed Accounts24.6%0.6%2.0%12.0%2.4%2.4%0.0%0.0%
Total Equity56.0%0.8%1.7%40.0%1.3%1.9%24.0%0.3%1.7%
Total Debt15.0%1.7%1.0%25.0%1.7%1.0%35.0%1.0%1.0%
Total Cash29.0%0.6%0.5%35.0%0.6%0.5%41.0%0.6%0.5%
Total Investment100.0%0.8%1.2%100.0%1.1%1.1%100.0%0.6%0.9%

There are no changes in the portfolio as of now.

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 have started building the long end of the portfolio at post tax lock-ins closer to 7%. We have allocated small capital to debt alternates like Investment Trusts and REITs, will be adding further instruments/allocations in this category depending on upcoming opportunities.

We are holding 50% of the debt allocation in cash for now. We will be adding the Debt ETF under MF category in this month to the tune of 10% of the debt allocation as of now. The remaining debt allocation will get gradually deployed over the coming months.

On the equity front, we continue to believe several steps by government over the past 3 years which favour 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 continue to consider 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, however we feel it will be tough to beat the 7% annualized return consistently and do not want to allocate too much energy behind monthly outperformance on this part.

All dividends and interest pay-outs are being 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 in case you want more details on this front.


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