Porinju Veliyath is making money hand over fist. His life story can be a case study for other fund managers on how a genial attitude, simple approach of sharing stock ideas and managing public relations can lead to seriously big money.
When I last reported on the situation in June 2015, the AUM of Porinju’s PMS, Equity Intelligence, stood at Rs. 220 crore. Porinju had himself revealed this fact in an interview to CNBC TV18.
Today, Equity Intelligence’s AUM stands at Rs. 330 crore. Porinju made this startling disclosure in his latest interview to NDTV (@16.35).
This means that in just about three months, Porinju has raked in an amount in excess of Rs. 100 crore from eager investors!
This is quite remarkable when you bear in mind the fact that the stock markets are in a moribund state and there is no froth or excitement amongst the average investors.
In fact, the mutual funds are struggling to attract investors. The PPFAS Mutual Fund, for instance, has seen its AUM increase from Rs. 593 crore in June 2015 to Rs. 598 crore in September 2015, a meager increase of only 0.83%. This is a far cry compared to the 50% increase seen by Porinju’s PMS in the same period.
Porinju also disclosed that the PMS has a concentrated portfolio of only 8 to 10 stocks. This is surprising because it was always assumed that because Porinju prefers to invest in so-called low-quality stocks, he would have a highly diversified portfolio so as to mitigate the risk.
One stock, NIIT Ltd, is 17% of the portfolio, Porinju revealed. He did not indicate what the other stocks are. My guess is that Selan Exploration, Jubilant Industries, Ansal Buildtech, Om Metals, Tata Global Beverages, TCI, HSIL, Godrej Properties etc may be the rest of the portfolio.
Porinju dropped a hint in the interview that the PMS is compounding gains at a phenomenal rate of 33%. He also confirmed this in a tweet:
Value Investing is all about 'Stock Picking'; India is a paradise for the game! pic.twitter.com/n5c0jfZIPj
— Porinju Veliyath (@porinju) October 3, 2015
You will be astonished to note that a CAGR of 33% means that your money grows 40 times in 13 years. A sum of Rs. 1 lakh, compounded annually at 33%, grows to Rs. 40.75 lakhs in 13 years. In 20 years, the said Rs. 1 lakh becomes Rs. 2.99 crore.
Porinju also indicated that the 33% return is after fees and expenses. According to an old prospectus of Equity Intelligence, the fee charged by the PMS is 1% of the average NAV plus a 20% share of the returns above 10% p.a. So, if 33% is the take-home return for the investors, it means that the fund has earned 38.75%.
This means that if the average AUM is Rs. 330 crore and the fund earns 38.75% annually (Rs. 127 crore), Porinju keeps a 1% flat fee of Rs. 3.30 crore and also keeps 20% of the excess above 10% of the gains (Rs. 22.86 crore). The investors keep Rs. 104.14 crore. Porinju’s take-home pay is Rs. 26.16 (Rs. 3.30 crore + Rs. 22.86 crore).
No wonder Porinju has a big and happy smile on his face at all times!
Now, what we have to discover is Porinju’s secret formula for attracting investors, picking winning stocks and making such enormous sums of money!