Insider Shadow Fund

Objective

Generate superior risk adjusted returns, in relation to the broad market, by investing in fundamentally sound companies where the promoters’ have acquired additional shares at market prices or companies that have repurchased their own shares. Typically, such an action by a company or a controlling shareholder demonstrates their conviction that the company’s growth prospects or inherent value has not been captured in its stock price at that point.

Strategy

The strategy is to create and update (on a daily basis), a universe of companies where the promoter is increasing his stake at market prices either through creeping acquisitions or buyback route, where complete disclosures of stock purchases have been made to the exchanges, and that seem to be motivated either by an undervalued stock price or an impending improvement in business prospects that are still to be reflected in the market price

From this universe the fund cherry picks for investment, firms using a bottom-up fundamental evaluation validated by the fund manager having a positive view of the sector in which the firm operates. An emphasis is placed on companies whose promoters have increased their stake in the recent past & where the current market price is trading at a discount or at an acceptable premium to the price at which the promoter increased his stake. The extent of financial outlay by the promoter or company has to be meaningful in relation to the size of the firm.

Portfolio Structure

The fund intends to keep investments balanced among companies, but may significantly vary exposure to companies as situations evolve. Typically, the fund will hold about 20 positions ranging from 2.5% to 10% of the portfolio, with a median of 5%.