2022 : The ‘Dull’ Year in Investing

I know we are well and truly into the new year, but I still think that it’s not too late to share our piece for 2022. Let me take this opportunity in wishing you, your family, your loved ones and all of us a very Happy New Year.

Let me begin with something we have reiterated several times in the past. This is the tweet from Marc Andreessen, cofounder, and general partner at the venture capital firm Andreessen Horowitz.

Nobody has any idea what will happen with stock prices, inflation, interest rates, or the economy in 2023.

— Marc Andreessen (@pmarca) December 31, 2022

The word for 2022

 In our 2021 end blog (Liquidity: 2021’s most used word (in the financial world) we had mentioned ‘liquidity’ as the most used word for 2021. It’s only fitting that ‘inflation’ follows it for 2022. Inflation plagued the globe and India as well, though in India we were relatively better off.

We covered inflation in some depth in our July 2022 post : Inflation, Investing & Charts. Hopefully things are getting better on this front, with inflation showing signs of moderation

Asset Classes : Equity

In the year end post last year( screenshot above), we had hoped for the next 2-3 years to be ‘dull’ for equities (in terms of returns). 2022 indeed played out to be dull. Couple of strategies allowed us to protect some downside:

• Not investing any lumpsums into global markets in 2021 ( we have been accumulating them gradually in 2022)
• Scaling down our equity exposure in 2021

However, even by delivering ‘dull’ returns, Indian equity significantly outperformed its global peers:

Our take for the near term ? After such significant outperformance, India should now participate with the rest of the world.  We don’t know the direction of this move, but we are clear of India’s participation. Indian equities long term robustness and advantage over other investment options remains stronger than ever before.

Debt

This was a rough year for debt funds. With more than 200 bps (2 %) hike in interest rates, debt funds had a huge mountain to climb. They didn’t do too bad though. Most of the debt funds delivered around 3.5-4 % p.a. Which in absolute might not look great, but if you are in it for 3 years (that’s where the long-term capital gains kicks in), you still did better than FDs (post tax). This is assuming you are paying more than 30 % tax on your incremental income.

Going forward, the returns look much better. We don’t know about the next 4-6 months, but over the next 18 months or more, we should significantly see better return

 Gold

Gold was the underdog that no one was rooting for. And boy, did it surprise everybody.

It delivered significantly better return with much lower volatility.

That’s why we recommend a 5-10 % allocation into it. Its performance might frustrate you on occasions, but it’s the best option for hedging your portfolio

In-house Updates:

Year end is also a time to take stock of our own journey. All of you are partners, stakeholders and believers in BuckSpeak’s journey.

The Choices we Make or don’t : Product Recommendation 

As you would know we aren’t enamoured by PMS/ AIFs just because they appear exotic or have higher threshold. Both, along with mutual funds fall under one category, called ‘Managed Funds’. So, if any of these products meet our criteria on : 1) Team 2) Process 3) Consistency, married with their alignment with specific customer portfolios, we don’t mind recommending them.

In 2022, we added Unifi PMS as part of our recommendation. It’s a great team, with 20-year track record in money management. They currently manage around Rs 14,800 cr (as on Dec 2022). The best part if that they invest for long term, which is not as common as it should be. The theme we are currently recommending does fall under high-risk, high conviction play.

Team Updates 

We are currently a 5 member team, divided under 3 groups: Client Relations, Client Success and Analysis & Research. As Indian economy grows, we are natural beneficiaries of that growth. We continue to see robust growth with clients, who value and align with BuckSpeak’s DNA. This obviously means that we are eager to add the right team players in all the three divisions. Our expansion is more of a function of finding the right individuals, instead of filling up a job profile. In simple terms, we want people who are ready to play the long term game.

Our idea of delivering high touch, bespoke investment solutions is what we think, would keep differentiating us from others. We also are clear that we aren’t the only ones doing this well. I am sure there are others 😊. The Indian eco-system needs quite a few BuckSpeaks (pardon the narcissism).

Having said that, we would be ‘selfish’ and want all your love, encouragement and feedbacks for us :-). Keep them coming.

P.S : While we are taking stock of 2022, found this eclectic mix of stuff to read. Some of it might be behind a paywall 🙁  pocket-most-read-articles-in-2022