Quarterly Updates

Quarterly Update-Mar, 22


“War does not determine who is right- only who is left”

-Bertrand Russel


If 2020 and 2021, will be remembered for Covid, 2022 will going to be certainly remembered for Russia-Ukraine war. Economically, this war resulted in a grim situation not only for these two countries, but for the entire world. Russia being the major exporter of oil and natural gas, energy prices went through the roof. With oil prices going up, inflation maths has gone for toss for household and even for central government. This type of sudden inflationary environment is one of the obstacles for post-retirement as it tends to eat away the corpus at accelerated rate.  Although, we can be only spectator of any unfortunate event, there are some key learnings for us from this or let’s say any war.


1. Geographical Diversification: One need to diversify its portfolio into major economies. We have seen sanctions against Russia resulting in weakening of its own currency and market. We have seen how developed economies can hamper the emerging economies. Even the bonds issued by Central banks (which is considered as the safest instrument) might default.

We at FinAtoZ, have been consistently diversifying your portfolio into developed economies by including international mutual funds in your portfolio.


2. Importance of Growth Assets: Leaving out growth assets from the investment portfolio is not an option anymore. Growth assets (viz. equity, real estate etc) are becoming increasingly important even for a retired person. Complete dependency on low risk guaranteed instruments after retirement is the biggest risk one can take in inflationary times. Only a 1% higher inflation than expectation can decrease your retirement corpus by 5 years. The real risk is not the volatility of your portfolio. The real risk comes when your savings cannot catch up with the inflation.


3Importance of Risk Management: With increased need of investing into growth assets and geographical diversification, risk management becomes an extremely important concept for portfolio managers. Risk management has to be tied up with goal planning. The money that is locked in growth assets is of no use if it cannot be liquidated during times of financial stress. We at FinAtoZ are extremely sensitive to this and strive to put in place advanced risk management techniques to ensure that our investors get the money when they need it the most!


Recent happening in personal finance space that can impact you:

1.  EPF rates reduced to multi-decade low at 8.1%.

One cannot rule out more such cuts in EPF rates in coming years. EPF trust invests 15% of money deposited with them directly in the stock market. As we know that, markets have given decent returns in the last one year. Despite good returns, rate cut to the tune of 0.45% is not a healthy sign for future rates. EPF corpus will remain a strong pillar for retirement, but higher dependence should be avoided. We at FinAtoZ have always assumed a conservative rate of 8% EPF returns while planning for our clients. So, we don’t need to make any change in your respective Retirement Plan till the PF rates are more than 8%.


2.  Restriction on fresh lumpsum and new SIP in international mutual funds by SEBI.

Mutual fund industry reached the RBI mandated regulatory cap of $7 billion in Feb 2022. Hence, SEBI had to put restriction on fresh investments into international mutual funds. However, international ETFs are allowed as of now. We are expecting this limit will be revised upwards by RBI in the coming months.


3Change in stance of major world economies from printing money to taming inflation.

This marks the end of liquidity easing policies as world economies are coming back on track. US Central Bank, Federal reserve has increased the interest rates for the first time by 25bps post-pandemic. We can expect 2-3 more such hikes in coming year. So, the liquidity can be a concern for the market in coming months resulting in some fluctuation. However, increase in rates also signifies an improving economy. Volatility along with stronger economy provides an ideal environment to average out your buying cost via monthly SIP.



New Addition to the List of FinAtoZ Approved Products:

1. PGIM Flexicap Fund: It is an equity scheme investing across Large, Mid and Small Cap. It is one of the top performing Funds in Flexi Cap Category, hence making it a lucrative investment. This fund has given 24.32% and 16.99% in 3 and 5 year period respectively. This fund is a good alternative to few of our existing approved Flexicap MFs.


2.  Marcellus – Rising Giants: It invests in Mid - size Co's that have the potential to grow in the coming years, i.e., selecting companies which have a dominant niche segment and are not yet discovered by the market.  It filters High Quality Stocks with good Cash flow and governance.  Minimum investment for this PMS is 1 Cr and it was open for investment in January. This PMS is more suitable for our Moderate aggressive customers who are looking at higher returns and are fine with a slightly higher volatility.


3.  Liquiloans NCD: NCD is a debt product issued by companies to raise money. This is a secured NCD having an underlying exposure to retail loans, same as their P2P Lending product. It has minimum investment of 10 Lacs and Yield of up to 10.25% p.a. They have issued three series till March. Asset quality and the risk of this product remains same as their P2P Lending product. By investing in NCD investors would now be able to invest more than 50 Lacs which is not possible in a vanilla P2P product.

4.  STRATA - Krrish Towers Office Opportunity- This Investment Opportunity enables investors to own a fractional share in a newly constructed Grade A Office Property in Bangalore (Mahadevapura). The office space is leased to Puma (Blue chip- tenant) for 15 years. Given the premium quality of the asset (Grade A) and tenant (Puma), investors can seek to earn a rental yield of 7-8% per annum. With an uptick in demand and leasing activity in Office Space in Bangalore, investors can expect to benefit from capital appreciation at a projected IRR of  12.5% (post fees & profit sharing) at the time of exit 8 years from now.  


5.  Myre Capital - Vaishnavi Tech Park - This Investment Opportunity enables investors to own a fractional share in a newly constructed Grade A+ Office Property in Outer Ring Road in Bangalore. The tenant, SmartWorks has signed a lease for 9 years. As a well-established IT Hub, Outer Ring Road is the most sought out location offering the largest stock of office space with the lowest rates of vacancy in Bangalore. As a Platinum rated asset (Rating provided by the Indian Green Building Council), the property is of the highest quality offering great prospects for capital appreciation. Investors can seek to earn a rental yield of 7-8% per annum. Given the prime location of this asset and its quality, investors can expect to benefit from a capital appreciation at a projected IRR of 13.5% at the time of exit 9 years from now. 


Update on few of the FinAtoZ Approved Products:

1.  PPFAS Flexicap Fund: Parag Parikh Flexi Cap, had recently stopped taking fresh investments, as it had 35% International Allocation. But on March 15, they have decided to accept fresh transactions. And, they will be investing in Domestics stocks, as and when the overseas investment limit is increased, they will rebalance the portfolio as per the prevailing situation.


2.  Buoyant PMS: The fund managers have increased the cash by 3% at the expense of large and mid-caps. At the same time, they have increased some allocation to small caps and changing their stance to incrementally aggressive one. Overall allocation towards Financials was significantly increased to 35% in Mar, 22.


3.  UNIFI PMS: Owing to the volatility caused by geo-political factors, they have increased the average cash position from 3.5% to 5.5% on in the last 3 months. They have also reduced the allocation towards IT sector & metals and increases some in BFSI domain. This PMS continue to focus on expected earnings for coming financial year.