Srikant Bhagvat of Hexagon Wealth discusses his strategies to gain Advisor Alpha, explaining its importance to not only HNIs but others as well. The difference only lies in the strategies implemented to gain Alpha for different categories of investors.
He uses his “Triangoal” mantra, based around fitting investment goals within a triangle. This strategy applies best to HNIs wherein he needs a 360 degree view of his client’s wealth to bucket objectives into four main categories – Retirement, Business Growth, Emergency and Surplus. Alpha is best generated when the strategies for dealing with these four categories are separately defined and expectations are managed individually. He points out the disconnect which occurs in cases where clients don’t share that 360 degree view of their wealth while still expecting Alpha, making it especially challenging because of the risks involved.
“Alpha is not a number, it is satisfaction”, he states as he explains how his management styles vary from aggressive to conservative for each bucket which ensures satisfaction even if returns are relatively similar.
Tactical Asset allocation is carried out based on fundamentals and valuations, not momentum or trends, in that, his strategy is not timing the market, but instead increasing or decreasing the risk in a portfolio. It is important to note that de-risking a portfolio is not limited to equity funds but includes debt funds too.
When asked how he makes a choice between Mutual Funds, PMS and AIFs for affluent investors, he stresses the importance of having a 360 degree view of a client’s wealth to know their risk tolerance. The core of his client’s portfolios include Mutual Funds and can include other products like bonds, stocks, private equity, real estate and start-up investing based on how much risk and excitement a client wants. His firm operates with strategic and tactical asset allocation built over a core and satellite portfolio.
Discussing affluent clients who have multiple advisors, he explains that investors are not equipped to make decisions independently, especially when there are multiple “nice-sounding” pitches that seem perfectly aligned with the market at the time. He stresses the importance of taking decisions based on facts and rational analysis, even if it means taking the multiple opinions they need to be sure. It is important to understand all aspects, right from risk-return trade-off and implications of taxation to net returns and how those returns compare to other similar products. “Many products look attractive on a gross basis but aren’t actually at a net basis”, he states, concluding with explaining the importance of being conscious of whether products are actually adding value to their portfolio.