Piper Serica provides Portfolio Management Service (PMS) to High-Net-worth Investors. It also manages Piper Serica India Numero Uno Fund that is based in Mauritius. In addition, it has tied up with smallcase.com to host 3 different model portfolios where retail investors can also benefit from the sophisticated portfolios that are otherwise available only to HNIs.
In a talk with Mr. Abhay Agarwal, Managing Director at Piper Serica Advisors Pvt. Ltd, we discussed about the current industry scenario and how the company is empowering its clients.
- What were the initial challenges you faced?
Creating trust with investors in the initial period was the biggest challenge. But things changed very rapidly as we were able to showcase how our investment process was beating the benchmark indices. Now we enjoy the trust of hundreds of investors and feel incredibly grateful about it.
- Which was that point that triggered the growth of the company?
We started managing funds in 2008 but for a very long period of time we did not market our services and restricted ourselves to serving our friends and relatives. In 2015, we decided that we will increase the size of our fund by marketing to new investors and in 2019 we set up our PMS. Then in 2020 we set up our Mauritius fund for non-Indian and NRI investors. These two events triggered growth for us.
- How have the company graphs changed since the foundation? Can you share a few statistics?
The following chart shows the massive out performance of our portfolio since its inception compared to the returns generated by Nifty over the same period.
- What is the reason behind your company’s long-standing success?
Our success is driven by much disciplined adherence to our sophisticated investment process. We do not let human bias interfere with our investment process. We have an investment committee that is made up of very seasoned investors and the management of the company ensures that our investment process of research, portfolio allocation and risk management is well defined and followed in totality without any exceptions.
- What are the services the company focuses on? How are your services different from those in the market?
We offer PMS services to HNIs and UHNIs. We also manage a Mauritius based fund that allows NRIs and non-Indians to invest in India. We are different from other service providers because we are top-down investors while most of our peers are bottom-up stock pickers. With our strategy of investing only in leaders of fast-growing sectors we are able to reduce the volatility in the portfolio. In addition, our portfolio is optimally diversified with about 15-17 stocks. Since we are long term investors our portfolio churn is much lower than our peers. We focus solely on long-term wealth creation and cater only to those wealthy investors who have the same requirement. We also have full skin-in-the-game. We encourage our employees to make their investments through the same portfolio as the PMS. I, personally, have made almost all my and my family’s public market investments through the PMS. We do not have any other conflicting business like a brokerage or product distribution.
- How do you decide to take the company a step further in terms of your services?
We are in the process of increasing our market presence by building a team of Relationship Managers. We are also going to appoint distributors in India and in other international markets who can showcase our services to their clients.
- Is there any new addition to the list of products/services? Anything exciting you would like to share?
Small retail investors can now also benefit from our investment strategy by subscribing to our three model portfolios hosted on https://piperserica.smallcase.com/. It is a completely digital platform that we have created in partnership with Smallcase where we offer large cap, multi-cap and small cap strategies. Retail investors can invest in these model portfolios through their online trading accounts and can also use the SIP option.
There isn’t a single formula. You need to know a lot about business and human nature and the numbers… It is unreasonable to expect that there is a magic system that will do it for you.Charlie Munger
- Can you please brief us about your professional experience?
I have been investing in stock markets for the last 28 years. I completed MBA from Jamnalal Bajaj Institute in Mumbai in 1993 and joined Citibank to manage a fund that the bank had recently set up. In 1998 I joined JP Morgan Private Equity Fund and worked in Singapore and Hong Kong. In 2004 I returned to India and founded Piper Serica Advisors.
- What are the key achievements of your entrepreneurial journey?
Our key achievements have been getting the trust of a set of very loyal investors over the years. They have benefitted from our investment strategy that has delivered higher returns than any mutual fund and most of our peers. As a result, they stick with us even when the markets are volatile. We have never lost any investor. In fact, we are very happy when our investors regularly refer us to their friends and family members.
- According to you, how has the stock market changed over the years?
Stock market has become very democratic over the years, largely due to digitalization. There is no need for any paper now since the share certificates are dematerialized, contract notes are generated digitally, and funds are transferred electronically. In addition, there is more transparency and less insider trading. With new fintech apps, information is freely available to all investors at the same time. This has been a refreshing change and one needs to thank SEBI for bringing in this change.
- How do you look after your employees? What makes your team unique?
The average age of our team is less than 30 years helping us build a very unique culture of openness and commitment to each other and to our investors. There is focus on constant learning and we are always looking for ways to improve our performance. With a young team we are able to adapt new technologies and trends quite fast. There is complete loyalty that the team members have to each other. The motto is ‘work hard and play hard’. We ensure that employees are remunerated handsomely and are paid more than their market compensation.
- Is there any special experience with your clients you would like to highlight?
We are very happy with the fact that more than a third of our investors are women. They are typically more cautious and have a very long-term approach to investing. So, we are very thankful to them for giving us an opportunity to manage their wealth. We also have investors who have opened accounts for their minor children with us for long term wealth creation and estate planning. Lastly, we have had a very pleasant experience recently where a couple of our investors opened new PMS accounts for their daughters who were getting married and gave them the PMS account as a gift. We have the deepest sense of gratitude to our investors who trust us with their hard-earned money.
- One person who you admire the most?
I have learned a lot from investors like Warren buffet, Charlie Munger, Peter Theil and Marc Andreesen. I particularly admire Charlie Munger and recommend that every investor should read his book “Poor Charlie’s Almanac”. However, the one person I admire the most is my late father Shri Satyanarain Lal Agarwal. He was an upright IRS officer who led a very principled life and did not waiver from his principles and values in the toughest of times. Whenever faced with a choice he always took the high road even though it may cause suffering in the short term. Emulating him has helped me build a temperament that allows me to ignore the short-term volatility of the markets and focus on long-term wealth creation.
- Whose business story do you find the most inspiring?
HDFC Bank has been the most inspiring business story more so since I have been able to witness it up close right from the time the bank came out with its IPO. It is a testament to what can be accomplished by a great team of professionals working together under the leadership of a visionary leader. The most amazing thing is how the bank has been able to grow at a rate of 20% year on year without diluting its asset quality. I like to believe that sooner than later HDFC Bank was will be rated as the best bank not only in India but globally.
- Which is the most inspiring quote you have read?
“There isn’t a single formula. You need to know a lot about business and human nature and the numbers… It is unreasonable to expect that there is a magic system that will do it for you.” This quote by Charlie Munger is something that I pay a lot of attention to. It basically says that to be a good investor one needs to build a latticework of mental models and that can happen only by constantly educating oneself across disciplines. This automatically leads to development of a curious mindset and constant questioning of one’s own investment thesis.
- What is the most important Rule to Investing?
Doing a full 360-degree research on a company before investing is the golden rule. This requires the investor to meet a company’s management, competitors, suppliers, distributors, ex-employees etc. Only after this can an investor truly come up with an investment thesis and track the company’s performance. Investing without doing any research is just speculation.
- Constant vigilance- a need or a strategy? Please share your views.
A long-term investor does not need to make regular changes to the portfolio. However, the market volatility does give astute investors regular opportunity to add to or reduce to their existing holdings. As our risk management strategy, we do not allocate more than 10% of the total portfolio to a single stock. We book profits whenever a stock crosses our valuation threshold and bring down its allocation. This strategy has helped us outperform the benchmark index.