Unifi Blend Fund

Background

Unifi Capital actively manages seven bottom up equity strategies that sift through opportunities across the breadth of the markets. Across the funds, the mandate is to participate in opportunities that arise from a mix of emergent themes, corporate actions and of course attractiveness of core fundamentals. The objective of all the respective funds under management is to deliver superior risk adjusted return from an absolute perspective.

The Blended Portfolio Strategy cherry picks from across the portfolio of companies that Unifi manages across each of the seven distinctfunds. In effect, the endeavour is to invest in “the best of our best” andreduce the investor’s switching cost and effort in migrating between best opportunities at any point of time.

Investment Strategy

Value creation requires a mental model which goes beyond the obvious. It requires a meticulous mind-set which is able to sift through reams of information and assimilate only that which is relevant in identifying value accretive opportunities. Metaphorically this could be compared to searching the proverbial needle in a haystack. This fund's investment strategy will be to pick the best opportunities from the following themes.

Spin Off: In a single corporate structure with multiple businesses, the sum of the value of the separate parts is often less than that of the whole. A de-merger of disparate businesses, unlocks the financial and management bandwidth required for the respective businesses to grow. Spin off fund invests in situations that offer great scope for the businesses to realize their full growth potential and attract commensurate market valuation.

BC-AD: India’s economy has a high proportion of unorganised businesses which are estimated to account for about 35% of the GDP.  As the economy grows in size from the current $ 2.6 Tn to $ 5 Tn over the next decade, it will traverse certain social, technology, scale, legal, taxation and regulatory changes. These changes are likely to challenge the current business models of unorganized players in certain sectors. As a result, well established organized players in such sectors will gain market share along with improving margins, potentially generating very high earnings growth. The BC-AD fund has been structured to benefit from this imminent migration of market share from the unorganised segment to organised players.

DVD: Few segments of the market tend to be mispriced in spite of visible growth prospects, resulting in such stocks trading at a deep discount to their intrinsic value. Reasons could vary from inadequate understanding of a business by most analysts, low relative market cap and liquidity or the lack of correlation to benchmark indices. DVD invests in such businesses and exploits market inefficiencies.

HoldCo: Many holding companies are run as group holding companies rather than strategic investment companies. This results in a perennial discount in their valuations, but such discounts are not a constant. The Holdco fund identifies strong underlying businesses and looks for massive valuation discounts that are likely to narrow due to changing regulatory landscape and from value convergence in a rising market.

APJ 20: As always, markets fancy few sectors that have done well in the past ignoring the rest. Of the sectors which are less understood, few such as speciality chemicals& precision manufacturing have become globally competitive and are privy to an expanding market opportunity. APJ20 invests in firms that have evolved and are in a ripe position to benefit from such growth prospects.

Green Fund: The investment focus of the green fund is on companies which provide products and services that help in reducing the carbon footprint in the environment and/or result in more efficient use of natural resources. Within the context of this strategy, the sectors that have been identified for creating the portfolio are - emission control, energy efficiency, water management and waste management.

Insider Shadow Fund: The Insider Shadow Fund invests in companies which have repurchased their own shares or where its promoters have acquired additional shares at market prices. Such an action demonstrates their conviction on company’s growth prospects or inherent value not captured in stock price at that point. The proposition is to gain from the eventual balancing of the value-price mismatch in the market.

Universe

The fund’s investment universe would include the diverse investment opportunities within the following mentioned funds at any specific point of time: SPIN OFF, BC-AD, DVD, HOLDCO, APJ20, Green fund and the Insider Shadow Fund.

The fund’s investments will be majorly concentrated in small and midcap space wherein it is difficult for “institutional” type of capital to invest and where Unifi’s relatively smaller size helps us to focus in niche areas of the market.

Portfolio Structure

Please refer brochure