OPEN STRATEGIES

Blended - Rangoli

Objective

The Blended - Rangoli strategy cherry picks the best opportunities from across seven thematic funds that Unifi manages. The mandate is to participate in opportunities that arise from a mix of emergent themes, corporate actions and attractiveness of core fundamentals. The strategy aims to thrive through market cycles and helps cut down the investors switching cost and effort in migrating between different strategies over time.

Investment Approach

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. The investment strategy will be to pick 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 invests in situations that offer great scope for the businesses to realize their full growth potential and attract commensurate market valuation.

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 strategy identifies strong underlying businesses and looks for massive valuation discounts that are likely to recover as promoters feel the heat of change in the regulatory landscape; meantime benefiting from value convergence in a rising market.

APJ20

As always, markets fancy a few sectors that have done well in the past ignoring the rest. Of the sectors which are less understood, few like speciality chemicals, agri, 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

The investment focus of the green strategy 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 Strategy

The Insider Shadow Strategy invests in companies in which founders’ have acquired a meaningful quantity of additional shares at market prices. Such an action demonstrates their conviction on a company's growth prospects or inherent value not captured in stock price at that point. The proposition is to understand and validate the founder’s perspective of value and gain from the eventual balancing of the value-price mismatch in the market.

BCAD

The investment focus is on established companies in specific sectors which are leading the migration of market share from unorganised players to organised players. As India’s economy grows rapidly in scale and sophistication, several sectors are positioned to change dramatically over the next decade. Certain powerful trends are driving the shift in the balance of competitive advantage in favour of organised businesses.

Universe

The investment universe would include the diverse investment opportunities within the following mentioned funds at any specific point of time: SPIN OFF, DVD, HOLDCO, APJ20, Green Strategy, Insider Shadow Strategy and BCAD.

The 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.

Investment Risks

Though careful and meticulous effort would be put in selecting only the best of opportunities’ within UNIFI’s fund universe, the risks here can originate from the time required for value unlocking in case of stocks picked from the Spin Off or Holdco universe. Other risks will include ones associated with illiquidity, change in strategy, change in business fundamentals and value destructive acquisitions in the case of stocks selected from the APJ, Green or DVD universe.

Portfolio Structure

Unifi’s core competency lies in conducting deep bottom-up fundamental -oriented research to curate client portfolios. Basis our investment philosophy, our portfolio construction framework prioritizes a balanced mix of stocks across sectors based on our investment thesis and conviction, ensuring adequate diversification amongst such quality businesses. The portfolio’s concentration at any time purely reflects our sectoral or stock-specific investment thesis. While maintaining responsible diversification by limiting company/sector level exposure is an important priority, we do not have rigid allocations. When we evaluate a business, we are not biased about its market capitalization but are concerned more about the size of opportunity that the business can offer. Hence, our portfolios are generally market cap agnostic.

Our typical portfolios endeavor a good balance between diversification and concentrated exposure. We periodically review the portfolios to maintain an appropriate portfolio mix depending upon investment objective, market conditions, risk tolerance and liquidity requirement to ensure diversification.

Benchmark: S&P BSE 500 TRI