Nikhil Kamath enters wealth management, launches PMS
Premium- Kamath’s True Beacon plans to actively use derivatives and government bonds to deliver outperformance
Zerodha co-founder Nikhil Kamath, who is also the founder of True Beacon—an alternative asset manager—has announced his entry into wealth management. True Beacon will offer portfolio management services (PMS) targeting high net worth families. True Beacon has been offering alternative investment products since 2019 and has a client base of 300 apart from Kamath’s own substantial base of contacts among India’s wealthy. The company has assets under management of around ₹1,500 crore. Alternative investment fund (AIFs) have a minimum ticket size of ₹1 crore per client. True Beacon Wealth is targeting assets under management (AUM) of ₹750 crore in its first year of operations. Although the firm plans to offer all types of PMS services, its focus will be discretionary PMS.
“Wealthy families don’t necessarily have the time to approve every transaction and micromanage their portfolios. Hence, our focus will be discretionary PMS," said Richard Pattle, co founder and CEO, True Beacon.
Kotak Mahindra Bank will be the custodian to the PMS and will provide accounting and reporting services.
“The use of derivatives will be a key differentiator. We will use derivatives for instance to give customers access to commodities rather than opting for commodity stocks. Another unique selling point is the fact that government bonds will feature prominently in our offering. We will also have among the lowest cost/fee structures in the industry. We will also have a dashboard that will provide a daily NAV, in contrast to the periodic reports provided by existing PMS managers," said Nikhil Kamath, co-founder, True Beacon.
True Beacon will focus on families who have total investable assets greater than ₹10 crore, according to Pattle.
True Beacon will also offer global stocks to its clients in the future, he said. It is planning to provide a portal allowing clients to network with each other, a facility currently available to clients of its True Beacon One AIF.
Kamath launched True Beacon One in 2019, a Category III AIF (which can take long as well as short positions). He followed this up with True Beacon Global, an AIF operating out of GIFT city focused on non-resident Indians and foreigners in May 2021. As an investment manager, Kamath has followed a conservative path after enjoying strong returns in 2019 and 2020.
Over the past year, True Beacon One has hedged out around 50% of the fund’s portfolio. True Beacon One has delivered a CAGR of 20.67% since its launch. However, its conservative stance ate into returns in FY2021-22. These stand at 3.9%, compared to 19% of the Nifty in FY22. Kamath continues to be bearish and says he is in no hurry to lift his hedges in the near future.