Abakkus Diversified Alpha AIF

Investment Strategy

Abakkus Diversified Alpha AIF follows a structured 40:30:20:10 allocation, balancing exposure across large-, mid-, small-, and micro-cap stocks. The strategy combines fundamental research with tactical flexibility to capture alpha across market cycles while maintaining a focus on risk-adjusted returns.

Core Investment Approach

Multi-Cap Portfolio with a Disciplined Allocation Model

• 40% Large Caps: Provides portfolio stability and liquidity.
• 30% Mid Caps: Targets companies with strong growth potential.
• 20% Small Caps: Focuses on identifying emerging market leaders.
• 10% Micro Caps: Opportunistic exposure aimed at high alpha potential.

Fundamentally Driven Stock Selection

• Focuses on earnings growth, competitive advantage, and overall financial strength.
• Avoids companies with excessive leverage, weak governance, or unsustainable business models.
• Seeks businesses with the potential to double earnings over a four-year period.

Flexible Yet Disciplined Investment Process

• Patient, buy-and-hold approach that allows businesses time to compound intrinsic value.
• Contrarian mindset, with willingness to invest in under-researched or temporarily out-of-favour areas.
• Strict risk–reward assessment to ensure expected returns adequately compensate for underlying risks.

AMC Background

Abakkus Asset Manager is a relatively new AMC in India, established in 2018. The firm was founded by Sunil Singhania, former CIO of Reliance Nippon AMC, who brings over two decades of market experience with a strong focus on small-cap investing. Despite being a young AMC, Abakkus has scaled up well, supported by the strong pedigree of its founding team and solid performance across its initial years. The core investment team, led by Sunil Singhania and Aman Chowhan (another former Reliance AMC veteran), collectively brings over five decades of investment experience, making Abakkus a credible long-term platform.

Investment Philosophy

Abakkus follows a bottom-up investment philosophy with a strong emphasis on balance sheet quality and earnings growth. Each investment opportunity is evaluated on individual merit rather than being driven by themes or styles.

Tenets of the Investment Philosophy

• Focus on Alpha Generators: Alpha generation is driven through identifying growth companies with above-average profitability, fundamentally underpriced value opportunities with reasonable growth expectations, and scalable mid-cap businesses that have the potential to become large caps.
• Contrarian in Nature: Preference for being early or among the first investors in identified opportunities, rather than following consensus positioning.
• Buy-and-Hold: Invests in businesses as long-term partners rather than adopting a short-term stock-picking approach.
• Risk–Reward Discipline: Strong focus on valuation and understanding what is already reflected in the stock price.

Abakkus’s MEETS Framework

• Management (M): Evaluation of management quality based on capital allocation track record and fairness toward minority shareholders.
• Earnings (E): Assessment of earnings quality (cyclical or structural) and the ability to double profits within four years or achieve meaningful EV/EBITDA compression.
• Events / Trends (E): Analysis of upcoming events, disruptive trends, or emerging themes that could drive re-rating.
• Timing (T): Guided by the principle that a good company is not necessarily a good investment at the wrong price; emphasis on what the market is discounting and the investment time horizon.
• Structural (S): Evaluation of opportunity size, competitive moat, and consistency of profit growth.

Avoid the Four Cs

• Chase Momentum: Investment decisions are driven by fundamentals rather than price movements.
• Churn Unnecessarily: Avoids needless portfolio turnover and trading-oriented behaviour.
• Copy and Mimic: Avoids herd mentality and consensus-driven investing.
• Credit Risk / Fractured Balance Sheets: Companies with stressed balance sheets are avoided as they often turn into long-term value traps.

Exit Strategy

• Fundamentals deteriorate due to sectoral, company-specific, or governance-related issues.
• The stock performs materially better than expected.
• The position becomes insignificant and cannot or should not be increased.
• New investment ideas offer superior risk–reward compared to existing holdings.

The philosophy is further reinforced through a disciplined valuation framework, where investments are typically made either in attractively valued companies (trading below 15x earnings) or in higher-quality businesses that meet strict thresholds of earnings growth and return ratios (ROEs and earnings growth above 15%). Most investments qualify on at least two of these three parameters.

Suitable For

Investors seeking diversified equity strategies managed by a stable, high-quality, and experienced investment team with a long-term, fundamentals-driven approach.