This hedge fund manager tells you how to create alpha in volatile times

This hedge fund manager tells you how to create alpha in volatile times – Mail Bonus

Greed and fear often hinder investors’ ability to think rationally. When the market gets on its nerves, the chances of a big loss become a real possibility as the emotional factor comes into play.

This is where amazing methods score.

Bulk funds rely on algorithms or systematically programmed investment plans. Investments in various methods are based on many brands based on economic data points, security price developments, real-time business news or other measurable variables. This introduces an institutional process without subjective bias.

In addition, achieving the passive style of continuous research and implementing newer models make volume funds equally effective.

These methods are in their infancy in India, but they are attracting investors’ attention, says Vaibhav Sanghavi, who is based in Mumbai and was one of the first fund managers to venture into a hedge fund.

“What is extremely important in such plans is how consistent and comprehensive they are at the same time as they achieve the goal. According to long-term plans, from our point of view, risk-adjusted returns are the cornerstone we differentiate around. Although one year has been difficult for the market “Our volume-targeted methods have been relatively effective,” said Sanghavi.

At present, low interest rates and sufficient liquidity, which have pushed the bull run since March 2020, have begun to reverse, leading to a correction in the market. Sanghavi expects the market to remain volatile over the next few months, until inflation is cool.

He said that many medium-term indicators in the volume range indicate greater fluctuations with strong market development between asset classes.

To make the most of it, he advises investors to look at market-neutral methods that are designed to be effective in market conditions.

Yields from such methods are better when there is a significant gap, or distribution, between the best and worst stocks.

This is the opposite of a period when stocks move together at the same time with a high correlation between markets and offer relatively less opportunity to take advantage of incorrect prices.

Sanghavi, who has 17 years of expertise in hedge funds, has been a student in observation and analysis all his life and that his investment philosophy has always had risk management at its core.

About his favorite author, Nassim Nicholas Taleb (
Black swan), Sanghavi states Taleb’s theory of building weight in negative events and the ability to take advantage of positive events wholeheartedly, as it emphasizes various aspects of risk and vulnerability.

“I really enjoy his philosophical and experiential reflections on life-changing events,” he said.

As Sanghvi was one of the first fund managers to venture into a hedge fund and early in his career, Sanghvi says he has taken considerable risks in a long short marketing strategy to understand the highs and lows.

“Risk-adjusted returns” are one of the basic assumptions in finance, but one that few investors truly understand, he said.

“I believe that each individual should evaluate their portfolio based on this idea as well as focus on creating alpha,”

Sanghavi started his career in 2000 with

where he worked for five years as part of its equity and private banking team. He also worked with DSP Merrill Lynch’s strategic risk group for three years and was responsible for managing their own $ 1 billion equity investments. He later served as CEO of Ambit Investment Advisors, before joining Avendus in 2016.

Neutral marketing strategy
Sanghavi said that a market-neutral policy seeks to create a stable and increased return, on a risk-adjusted basis, regardless of the market environment. The policy benefits from offsetting long and short positions. For example, for every Rs 100 long positions model takes 100 rupees short positions, with different types based on business, industry basics and technical data.

The focus of the strategy is to reduce one of the most important aspects of investing in equities – market risk. At the same time, it aims to capture the inherent distribution within and within the sector, he said.

Shanghvi said the portfolio building was a compilation of various stocks based on the different types he uses in his case in his market-neutral fund.

As this policy seeks to leverage the relative performance of stock prices by being long and short with equal amounts in various stocks, Sanghavi says that portfolio diversity and a broad portfolio help it deliver important risk factors such as fluctuations and write-offs.

Sanghavi said that the rising interest rate system has historically been favorable for market-neutral methods. Since higher interest rates usually lead to more fluctuations and more price changes within the sector and equities, the opportunities for this would be sufficient, which will lead to better income generation, he said.

(Disclaimer: Advice, suggestions, opinions and opinions given by experts are their own. This does not represent the views of the Economic Times)

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