Samco announces launch of mutual fund business; introduces stress testing strategy for schemes

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Samco Asset Management on Tuesday announced the launch of its mutual fund business and said it plans to introduce schemes with high active share.

In addition, the asset management company (AMC) said only those companies that pass its stress test framework will find a place in its schemes of portfolio.

The announcement comes after Samco received final approval from capital markets regulator Sebi on July 30, 2021 to launch mutual fund business.

Jimeet Modi, founder and director of Samco Asset Management said,”We are going to file scheme documents with Sebi today evening and after getting approval from the regulator we will launch our first scheme”.

He further said the AMC will launch its first scheme in flexi cap category, followed by global active fund.

“We are expecting to launch our first fund in 90-120 days,” he said at a virtual press conference.

Speaking about stress tested investing, Modi said it is a strategy to put to work money with businesses that can endure and survive in a variety of stressful situations and generate long-term risk adjusted returns.

Each business is put through a series of six rigorous tests defined by Samco’s proprietary HexaShield framework and only businesses that pass the test will form a part of the investable universe.

The framework is designed to test whether a business can survive across a variety of macro and micro economic pressures and truly be a compounding machine.

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The six parameters of stress test are –reinvestment and growth, corporate governance and leadership, cash flow, balance sheet and debt, competitive strength and pricing power and regulatory. “Most listed companies end up failing the stress test. In fact, only 15 out of Nifty 50 index constituents pass

Samco’s stress test framework. Only a limited number of companies that pass the stress test certified via the HexaShield framework will find place in the Samco Mutual Fund’s scheme portfolio,” Modi said.

These stress tested businesses have demonstrated capabilities to generate much superior risk adjusted returns.

Samco Mutual Fund will transparently disclose daily active share to investors, so they know that when they are paying an active fee, it’s certainly for buying something widely different from the index. “The stress test framework results in very few companies truly passing the stress test with 70 per cent of the index components failing it. So, we will embrace divergence from the index and disclose active share. In fact, Samco’s endeavour will be to launch only truly active funds with high active share,” Modi said.

According to him, the world of asset management is going through various disruptions and Samco aims to be at the forefront of leading disruptions on the active segment.

“We will build funds with high active share so that cost conscious investors get a truly active fund and not a closet index fund when they pay for an active TER (total expense ratio) and our stress tested investing framework gives the new age investor an authentic and not merely a generic reason to invest with us,” he said. According to him, the company’s endeavour would be to generate the highest risk adjusted returns for investors in the long term.

Umeshkumar Mehta, CEO of Samco Asset Management, said the company will refrain from launching schemes like Infra Funds, PSU funds, Power and Energy funds, Dividend Yield funds, etc because these categories typically do not make the cut as far as passing the stress test framework is concerned.

Now, Samco is the 77th entity to receive mutual fund registration from Sebi when seen from a historical perspective. However, in terms of number of players active they would be 45th when they get industry body Amfi membership.

At present, 44 mutual fund houses manage assets to the tune of over Rs 36 lakh crore.

Recently, Zerodha and Bajaj Finserv too received approval from Sebi to set up AMCs.

Besides, companies including Frontline Capital Services, Wizemarkets Analytics, Unifi Capital, Alchemy Capital Management and Helios Capital Management Pte Ltd are eyeing an entry into the MF space.

These companies have already approached Sebi for a mutual fund licence. 

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