shepherd's Hill - Portfolio Management services (PMS)

Shepherd’s Hill offers discretionary portfolio management services (PMS India). This means you let us manage your money, similar to a mutual fund. However, PMS managers have advantages over mutual funds, being a smaller size and able to provide personalised service. Shepherd’s Hill PMS is one of the only PMS providers in India that does not charge any client a fixed management fee. Fees paid by PMS clients are purely based on performance.

Shepherd's Hill Group Pune office

Shepherd’s Hill PMS India - Value Magno

Investment Philosophy

We are long-term, equity-focused value investors. We look for companies that have intrinsic or inherent value that are not priced correctly by the market for some short-term or irrational reasons. While this is not easy, because the market is very efficient in its assessments, it is not impossible.

Market-Cap Agnostic (Magno)

Shepherd's Hill PMS India, because of its relatively smaller size, is able to take positions in small and medium-capitalisation companies in addition to large, bluechip companies in India. The size advantage allows the PMS to find mis-priced "hidden gems" and large, well-known companies.

Strong Interest Alignment

The PMS charges only a performance fee of 22% of profits over a hurdle rate of 6% per annum. If the return in any year is less than 6%, then the shortfall is added to the subsequent year's hurdle. This fee structure creates a high degree of alignment of interests between client and Fund Manager.

Balanced Portfolio

The PMS will maintain a balance between diversification and focus by holding roughly 15-20 positions in the portfolio. This framework seeks to avoid the risk of concentration while seeking to outperform the India index (NIFTY) or the average India mutual fund that has 50 or 100 stocks in it.

Focus on Indian Securities

We have a 5+ years track record and expertise in India's capital markets as a PMS (India) service provider. We received SEBI's PMS (India) license in 2015. Our focus is on securities of companies that are listed on India's stock exchanges. We can accept India residents and Non-Resident Indians (NRI) as PMS investors.

Sector-Agnostic

The PMS uses a bottom-up approach to investment management. This means the focus is on company-level operations and environments. Investment decisions are made purely on the merits of the security under consideration. We do not perform macro or sector analyses as a starting point for our research.

Protection of Capital

The primary objective of the PMS is protection of capital over the long term. Our clients are saving money for important purposes such as retirement or children's education. The secondary objective is earning superior returns. We do not do short-term trading or leverage through derivatives, futures and options, etc.

Long-term Time horizon

Our PMS requires all new investors to commit to an investment time period of 5 years. This long-term perspective allows the PMS to take advantage of "time-arbitrage" opportunities. That is, the PMS buys good, well-run companies in India at prices that are overly discounted due to short-term considerations.

Who Can Invest in Shepherd's Hill PMS (India)?

Minimum investible capital of Rs. 50 lakhs.

5-year commitment.

Must be a resident or non-resident Indian.

FAQ

A PMS, or Portfolio Management Service, is a service which you can use to save and invest money. PMS managers can be of many types and have many strategies. Typically, a PMS manager will manage a bank and demat account for you (in your name) through which you will be able to invest funds. PMS managers are regulated entities in India and a PMS in India must have a license from the Securities and Exchange Board of India (SEBI), India’s security regulator.

A discretionary PMS gives full discretion to the PMS manager to deploy your funds in India in the manner it sees fit. Once the PMS (India) agreement is signed, the PMS (India) fund manager will have the final call on investments and the client may have limited to no influence on portfolio management.

Mr. Rishi Gupta is the fund manager. He has more than 15 years of experience in the capital markets. He is a graduate of Stanford University and was a private equity professional. He has been professionally investing in India since 2008. He has experience interacting and working with top management at the CXO and board of director levels and is a good judge of managerial character and competence. He has international experience and can assess global market factors affecting a company’s business. He is personally involved in the detailed quantitative and qualitative research that goes into an investment decision. He personally reviews the PMS portfolio to make sure it is correctly positioned and balanced.

While we are happy to walk you through our process and hypothetical examples of the types of companies our PMS (India) invests in, we cannot share proprietary information about portfolio holdings.

The fee structure in the PMS (India) is carefully designed to be fair to clients. The reason the hurdle rate is 6% is because the management fee is 0%. If the management fee was 1 or 2% we could have kept the hurdle rate higher, but we believe the 0% management fee structure produces the best alignment of interests between our clients and us – like a true partnership. (PMS India)

Yes, the early withdrawal fee for the PMS (India) is 3% in the first year, 2% in the second year, 1% in the third year and there is no withdrawal fee from the PMS accounts after three years.

No. We do not follow a single model portfolio in the PMS (India). PMS clients have portfolios based on their time of entry. A portfolio suitable in 2017 would not be suitable in 2020, even though multiple core holdings might remain the same. We follow the buy/hold/sell-range system. That is, each idea or holding of the PMS (India) has a price range within which we would buy, hold or sell it at any given point in time. 

There is no hard and fast rule since the PMS fund manager has flexibility based on available ideas. This break-up in the PMS (India) portfolio would be different at different points in time based on market conditions in India at that point of time.

For India residents: when you are ready to start, please fill out the PMS (India) application form and send us scans of your PAN card and address proof (passport or aadhaar card). Within 24 hours, we will dispatch a document package to you for your signatures. On return of the completed document set, and following an in-person verification (IPV) by the bank, the bank and demat accounts will be opened (this takes about 4-5 working days). After this, investments can begin.

For NRIs coming into the PMS (India) the paperwork is more cumbersome and, depending on whether a PMS NRE or NRO account is being opened, the time-frame can also be longer as there might be approvals required from the Reserve Bank of India (RBI).

No. We will be opening new specific PMS bank and demat accounts for you in the Shepherd’s Hill PMS (India), as these PMS accounts will be linked to each other and maintaining, operating and book-keeping for the exclusive PMS accounts is much more operationally efficient. 

No, you cannot transfer securities directly into the PMS accounts. You must transfer funds to the PMS bank account (a self-transfer, since this account will be in your name) through checks or through online banking to begin the PMS (India) investment programme.

No, since the PMS (India) accounts are custodian accounts, you will not have direct access to the bank and demat accounts. However, all PMS account holders will be given Shepherd’s Hill login facilities so that all India resident and NRI investors can check PMS account details at their convenience.

Kotak Mahindra Bank Ltd., one of India’s largest private banks, is the SEBI-registered custodian appointed for Shepherd’s Hill PMS India clients.

No, all dividends/income that is received in your PMS (India) accounts will be reinvested. Dividend income received on your PMS portfolio is usually 1-2% per year on average. You are free to proactively withdraw any amount from the PMS at any time, subject to applicable early withdrawal fees, as long as the PMS account balance does not go below Rs. 50 lakhs.

Yes, the PMS offers this option. Once the initial amount of minimum Rs. 50 lakhs is funded in your PMS account, you can add funds to the PMS bank account at any time, in lump sum or in tranches. This will be duly invested by the PMS manager.

  • There is no way to completely insulate yourself from a market downturn in the short-term. However, if you stick with the investment over the long term, our portfolio creation and stock selection aims to ensure that your investment will recover and even exceed the previous market highs over time. 
  • If we feel that market prices are exceedingly high and no attractive ideas are available, we may keep a material part of the funds in cash, liquid fixed income instruments or gold ETFs. This may provide some protection on the down side.
  • We are small so have more flexibility and opportunities to invest in good smaller companies.
  • We have a more focused portfolio so we can outperform the index by a bigger margin if our decisions are good.
  • We have a highly aligned fee structure. No management fees.
  • We work directly with our clients. We do not work through agents or distributors who earn commissions.
  • Mutual funds generally have higher portfolio churns. Our churn is very low.

A quarterly report will be provided for all PMS (India) clients which will include: 

  • Macroeconomic commentary by the Fund Manager
  • Return statistics of the PMS portfolio
  • PMS account holdings and transactions statements
  • Dividends and income information
  • Any other pertinent information regarding the PMS accounts

Deloitte Haskins & Sells LLP has been appointed to audit all clients’ accounts and produce a certified set of statements including balance sheet and P&L for the PMS India investment account after the end of each fiscal year. This will include tax information and capital gains statements to help file your tax returns.

You will get login credentials to our website shepherdshill.in where you will be able to see high level PMS NAV and return data on a daily basis, in addition to sector-wise portfolio composition.

For any queries, clarifications, or details you can easily access our relationship managers and management team, as we are a small firm.

Taxes in your PMS (India) accounts are the same as if you were investing directly through your personal account. The main income in your PMS (India) accounts will be capital gains and dividends. Tax rates on these incomes are subject to change from time to time and will depend on your individual circumstances. Please consult a certified chartered accountant for tax advice.

The following are the steps in our PMS investment process:

Screening and Short-listing. We use proprietary screening tools and software to focus on only those companies in India that we believe merit further research and analysis. With approximately 5,000 listed companies on the India exchanges, the PMS focuses research on a high-quality subset with the goal of achieving operational efficiencies.

Checklist Verification. The PMS will employ a proprietary checklist to identify any red flags that appear with respect to a potential investment. Issues for scrutiny include related party transactions, joint ventures, equity or debt investments in other companies, loans and advances that have been written off, exorbitant salaries to managers, and preferential allotments.

Financial Analysis. The PMS will perform an extensive quantitative analysis with respect to potential investments in India. We will analyse multiple years of publicly available data to create a financial picture covering many facets of operations, including profit margins, return on assets, debt levels, operating leverage, and dividend yields.

Qualitative Research. The PMS will research and judge the qualitative aspects of each potential investment. Topics relevant to this part of the process include management quality, minority shareholder communication (including quarterly investor calls), business moats, and relationships with suppliers and customers. 

Comparative Analysis. When the number of available investment opportunities for the PMS exceeds the number of investments that the portfolio can contain, the PMS fund manager will compare ideas to each other in order to assess the relative attractiveness of each. Considerations relevant to this analysis include over- or under-exposure in an industry sector and perceived correlations between assets.

Decision Point. A deliberate decision is taken on the choice of portfolio company considering all factors, with price of entry being a key consideration.

Continuous Portfolio Monitoring. Once an investment decision has been made for PMS, we will monitor each position continuously. Along with each investment decision, we will monitor the entire PMS portfolio in an effort to ensure that any portfolio-level risks are considered and mitigated to the extent possible.

Click on the image below to see a graphical representation of the Shepherd’s Hill PMS India process:

process-flow-SH

The Investment Process

process-flow-SH

Contact Us

Address

B5, STC Society, NS Phadke Marg, Andheri (E), Mumbai 400069, India.

1, Goldfield Plaza, Sassoon Road, Pune 411001.

Phone: +91 20 7127 9247
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