- Wealth PMS (50L+)
I wrote this for the Capitalmind team as we hit our 8th anniversary.
When I started Capitalmind, not many people believed that people would pay to read content. Who’ll pay, when everything is free? I wanted to build content+data, some kind of retail-Bloomberg which would create a good investor community.
I met Venki in 2014, and he had this incredible experience at Yahoo and Goldman Sachs and all that. He found the idea interesting enough to join hands and he built the data engine we called Snap. It was quite something – here’s the webinar where we explain the tools we built. Stocks, futures, options, the works.
Along the line, the community at Capitalmind came about, slowly and steadily. It was googlegroups at first, with discussions on email. We moved later to Slack, which remains to this date. While we had this going, I met Vashistha on twitter. He was in Delhi, trading options and writing code in Amibroker among many other things.
We met in Bangalore, in our little office on the 5th floor of a building whose lift only went up 3 floors. It was frugal, but it was ours; we’d been in shared offices before that and this one was just a big floor with tables.
Vashistha then introduced Shray to me and Capitalmind. Our content plan was okay, but we’d increasingly realized that the future was in asset management – where instead of just talking about stocks, we’d actually help investors buy and manage portfolios. Shray came in as a co-founder, investing into the company which then applied for a PMS license with SEBI.
We decided to build all the tech for the PMS in-house, and Dev, a long time customer at Capitalmind, joined in. The PMS started in November 2017, two months after we got our license. Dev and Venki built the entire back-end and operational technology, and Vashistha actually taught himself React from scratch and built Progress, our customer site for the PMS.
We charged just 1% as a fee. This was the lowest fee in the PMS industry then, where there would usually be a 2% fee, 20% profit share, and then further entry and exit loads. We wanted to keep costs low and scale our assets through sustained performance – and that performance would be better for our customers if fees were low too.
The first year was rough. The Finance minister introduced Capital Gains tax in January 2018, and midcap stocks crashed through the year. Then there was a crazy crisis at IL&FS, taking down the market even more. I made a whole bunch of mistakes sticking on with stocks that seemed great on paper, until you saw the charts, and customer returns suffered through that year. It was eye-opening, and we had to change strategies quickly.
In 2019, we evolved. We introduced Momentum – based more on a quantitative metric of rising prices than on the fundamentals. We changed the Long Term Multicap strategy to have more large-cap stocks to get less volatile returns and introduced a stronger element of growth compared to just value.
We also decided to be the first PMS to actually do indexing: the idea that stock picking might be inferior to just buying an index was popular in the US, but the data had started to show that it was so in India too. As people who were active stock portfolio managers, this could render us obsolete. So we said, we should embrace it. It started as top-100-India, top-100-US stocks. At an unheard-of fee of 0.25%.
Anoop joined us then, from ISB and Microsoft, and took over Momentum and the Premium platform. And then came that massive crash in Covid. We watched the screens almost helplessly, while the whole financial world seemed to melt away. The crisis, though, changed a lot of things. Anoop’s change in momentum meant we were nearly out of the market during the drop. The momentum portfolio only fell 15% when everything else fell 40. Markets recovered from May 2020, though, just as record foreign investments started to come in.
We quickly became a very popular smallcase provider with Momentum, just as Covid forced everyone into their homes, wondering what to do with the money they weren’t spending on petrol, travel and pubs. I suppose they chose to invest in the markets, and along with the foreign investments, India’s markets zoomed up. We’ve spent nearly 5 years now, in the PMS, have four active equity strategies, two debt portfolios, and further, there’s a few other strategies we are experimenting with (just with our own money).
Our fees are still 1% and 0.25% for active and passive strategies, respectively. Our team has expanded. Akanksha handles PMS sales with Roopa and Suresh. Venki and Dev now have Kapil, Babu and Sandeep helping them. Nandan handles our finance and compliance, with Nigil, Mithun and Sivaji. Varun runs PMS ops, closely with Nagaraj, Swati and our dealers, Vidya and Sathya. Priyanka manages our office, helped by Subramani. Anoop manages the brilliant premium team where Krishna analyses stocks, funds and bonds. Nihit works closely with our awesome community at CM Slack, with Jay Dhruv handling Chase and others. Anoop, Vashistha, Shray and I do a little bit of everything and a lot of something, including our townhalls, the podcast, the videos, the content, the strategy and the marketing.
We are a motley crew, in essence. Very few of us have an actual finance or journalism background, but we seem to have enough people that like our financial content, and our portfolio management. Our pedigree isn’t our degrees, it’s our effort, skill and hard work.
We’ve tried a lot of things, and weren’t afraid to fail. Snap is no longer available – parts of it, like outliers, are part of the Capitalmind Premium offer. We had one of the best options products ever – Stratoptions – which we shut down because our focus was in asset management where we couldn’t do options meaningfully. We had a “Big Whales” report on large investors, tools for analyzing and buying bonds, web sites for credit cards and personal finance – all great things that we had to shutter to stay focused. Sometimes you have to give up the great for the even greater, but I still miss them all.
What we learnt very quickly was: it doesn’t really matter in a steep drop that you aren’t doing as badly; you have to outperform in the good times. That the power of simplicity is attractive over the longer term, even if the complex sells fast. That building a business can be done by cultivating an audience who resonates with you, rather than selling hard. Our core values are transparency, simplicity and integrity, and they’ve served us well.
A special thanks to all of you on Capitalmind Premium. You’ve encouraged us to build better, grow well and be better investors. We hope we’ve helped you along in your journeys as much! I personally have a special love for the conversations, debates, macro thoughts, kya-lagta-hais, chart inputs, deals, offers, exchanging CRED points, planning Goa land acquisitions, daily exercise reminders and in general, the awesome spirit of the Capitalmind community. Onwards and upwards!
We grew 100% every year, in AUM and are now at 960 cr. that we manage, and another 1500 cr. we advise on. We have a phenomenal office, with four floors housing just 26 of us, because it’s waiting for us to grow. We’ve been profitable. We have applied for a mutual fund AMC license with SEBI, so that we can grow, profitably over time. We want to get to 100x where we are today.
When we first thought that we’ll hit 100 cr. in the PMS in a year, and then $100 million within five years, the response, even from professional investors was: you are just a blog. Well, this “just a blog” is now 8 years old as a business today. It’s a profitable business. It’s going to become an institution. My congratulations to all of you for this journey at Capitalmind. It’s the beginning of the rest of our journey.
Here is our Team Capitalmind:
We recently got featured in Livemint. Read it here [premium article]: