Yet, nine years ago, Shenoy was managing just one blog, writing down his thoughts on macroeconomics and its impact on the markets, and maintaining it via subscription.
Shenoy’s story goes back to 1998, when, as an engineering graduate, he started investing. “It happened by accident,” he tells Mint. Shenoy was developing a software to compete with Tally, the ubiquitous accounting package of Indian businesses, and so began to study company financials. However, by 2005, he had sold the business. Instead, he now wanted to develop software to help traders apply algorithms to India’s emerging equity market.
“The first few online brokerages were coming up in the early 2000s like Sharekhan and Reliance Money. I thought the time had come for algo trading,” he says. Within a few years, he changed behavior – developing algos that he and his teammates would deploy themselves. had fallen 30%,” he recounts. “Our hedges protected us and made us money. But it wasn’t all smooth sailing. At one point I went long in the market in a leveraged bet and lost capital. Lost a big deal. Why? Someone told me that going short is not patriotism. Moral of the story: Leave patriotism at the door when making investment decisions,” he laughs.
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Other issues, including volatile markets and his wife’s health problems, convinced Shenoy to stop prop trading and move out of Mumbai. He moved to Gurgaon where he started working for an algo trading company. “The business did well and after I left the company was eventually co-located on the stock exchange,” he continued.
Separately, Shenoy was pursuing a new passion. “The 2009 financial crisis also brought home the importance of macroeconomics in determining investment success,” he said, adding that “I started blogging about macro and its impact on the markets,” he said. After seeing a growing interest in his writing, Shenoy decided to work full-time on his material in 2013. There were mistakes again along the way. “I was focusing on YouTube videos in 2011, long before Indians were able to access cheap data and YouTube usage exploded. I was just too early,” he said. Although his writings attracted a significant following.
“In 2013, when I took it on full-time, I decided I would stop blogging until I got my first hundred subscribers in a month.” Luckily, readers answered his call. Shenoy took out a research analyst license in 2015, putting out stock recommendations and charging users a subscription fee. Before long though, readers wanted more than just research and recommendations. “They wanted someone to manage the money,” he said.
This gave birth to CapitalMind as a portfolio management service in 2017. But, it was not all smooth in the beginning. “Demonetisation happened in 2017, followed by the 2018 Budget which levied long-term capital gains tax. We saw an ugly drop of 20-25% at that point in our very first year. 2018 and 2019 The struggle continued for the fledgling portfolio manager. “Our custodian was IL&FS (which was also the custodian for most PMS managers). When IL&FS came under control, we had to shift the customers to a new custodian – ICICI Bank,” he says.
In the same year, Shenoy’s team developed a momentum investing strategy driven by an algorithm and that changed their fortunes. Shenoy explains it: “The momentum strategy was 50% cash as of February 2020 before the Covid crash. As the market recovered, it automatically bought fast-growing companies like Pharma in May. Between 1 March 2020 and 31 March 2021, it was up an astounding 61% (the Nifty was up 35% in the same period). The outperformance continued throughout October 2021.”
However, CapitalMind isn’t all about speed. There are three major strategies – Momentum, Multicap (the first strategy that was launched in 2017) and Market Index Fund. “The last strategy is extremely simple. The Nifty ETF has 66% and the Nasdaq ETF has 33%. After the foreign inflows stopped in February, we replaced it with the Nifty 150 ETF,” he says. CapitalMind charges 1% for its momentum and multicap strategies and 0.25% for its passive strategy. “Unlike other PMS products, we’re done with performance fees. We think they encourage the manager to take risks,” Shenoy said.
The Momentum and Market Index portfolios launched on 5th March 2019 have given CAGR of 22.98% and 10.87% respectively. The Multicap portfolio was launched on 3 November 2017 near the peak of the market in mid and small caps. Its CAGR since inception is just 4.41%. “It is after our fees. We calculate NAV with the same regulatory rules as mutual funds, which is unique among PMS, which usually only account for a few fees at the end of a year,” Shenoy says.
CapitalMind also has advisory assets of approx. 1,500 crores. “Some clients do not need to manage all their money as they have other investments including mutual funds, stocks, fixed income etc., which they execute through Family Office. We recommend them on their overall portfolio And use our analysts and quantitative process to help them take action or allocate them appropriately,” Shenoy says.
In its core PMS business, it is the momentum portfolio, managed by Anoop Vijayakumar, that really stands out and accounts for almost half of Shenoy’s AUM. 370 crores. A separate version of the Momentum Strategy is also available for users on Smallcase. However, the Momentum portfolio has been underperforming since October 2021. It is down 12.8% compared to 6.9% on Nifty in the last six months till June 22. It is currently sitting at 50% cash. Much of CapitalMind’s future success will depend on whether it is able to recover.
But Shenoy believes nuts and bolts matter, too. “We report a daily NAV, and we have reduced the account opening time to 3-4 days along with the custodian fee for new investors. Our technology is also self-developed rather than off the shelf. In the long run, There is more to investment experience than returns,” he adds. As it waits to enter the crowded mutual fund industry, it focuses on customer-spontaneity and Shenoy’s innate ability to explain macro economics and personal finance to the general reader. , may just become the differentiating factor it needs.