ALCHEMY ASCENT FUND

Fund Snapshot

Overview of the Strategy

The Alchemy Ascent strategy operates on an institutional thesis that treating markets as evolving systems—rather than trying to make subjective predictions—leads to repeatable alpha. The portfolio behaves like an active mathematical matrix: it continuously filters the broad Indian stock market daily to find companies where fundamental quality intersect with favorable market momentum.

The platform relies heavily on unbiased screening over 50 quantified fundamental parameters. It is designed to scale dynamically between Large-caps, Mid-caps, and Small-caps, adjusting seamlessly to multi-year market cycles. The strategy operates with an average cash level maintained at around 5% to 10%, ensuring that investor money is heavily deployed into high-ranked active equites unless market conditions call for defensive liquid positioning.

Core Investment Philosophy

The algorithmic framework governing the Ascent portfolio can be broken down into four strict foundational pillars:

I. Consistent Growth Above Cost of Capital

The algorithm strictly isolates companies displaying high earnings and cash flow growth. However, this growth is heavily adjusted for different levels of capital efficiency and operating margins. If a company exhibits a sharp divergence or fundamental deterioration in its core Return on Capital, the system applies a "negative marking" and slashes its score.

II. Value Adjusted for Quality

Unlike traditional "deep value" models that buy cheap, struggling companies, the Ascent model computes valuation based on adjusted Price-to-Earnings ($P/E$) and Price-to-Cash Flow ($P/CF$) relative to the company's growth acceleration. It ensures that the premium paid for a stock is mathematically justified by the underlying efficiency of the firm.

III. Strict Capital Allocation & Risk Moats

• The Rule of Rejection: The strategy explicitly operates under the mantra that "rejection is far more important than selection."

• Forensic Filtering: Bad balance sheet items, highly stretched working capital cycles, or sudden debt spikes spark an immediate algorithm block to screen out potential "CAGR killers" before they damage the portfolio.

• Allocation Limits: Standard weights range tightly between 3% to 6% per stock at cost, preventing single-stock overexposure. Exceptional positions are restricted to a hard cap of 10% at cost.

IV. Respecting Market Cycles & Reflexivity

The system believes that a stock being actively appreciated by the broader market increases the mathematical probability of investment success. It tracks the dynamic drawdown profiles, volatility metrics, and active market trends of a security. When a stock's rankings decay across 4 core quantitative attributes, predefined selling rules trigger an automated exit, and capital is immediately recycled into higher-ranked replacements.

Process

Ideation and Universe Screening

At Alchemy, the investment process begins with a broad universe of over 500 companies. This universe is systematically narrowed down to approximately 250 investible companies using clearly defined parameters. These include consistent growth in revenues and profits, minimum return on capital employed (ROCE) thresholds, prudent leverage levels, strong conversion of EBITDA into cash flows, and adherence to sound corporate governance practices.

Management Interaction and Ecosystem Assessment

Once companies with clear competitive advantages and scalable business models are identified, the investment team engages directly with senior management. These interactions focus on understanding business strategy, growth roadmaps, and capital allocation discipline.
To gain a well-rounded perspective, the team also interacts with the wider business ecosystem—industry experts, suppliers, dealers, and customers wherever feasible. This multi-angle assessment helps build a deeper, more holistic understanding of the company and its operating environment.

In-Depth Financial Analysis

Following the initial evaluation, the team undertakes a detailed financial analysis. Historical performance and forward-looking financial models are developed, with rigorous internal discussions around key variables and value drivers. Sensitivity analyses are conducted to assess “what-if” scenarios and determine the company’s risk-reward profile.
The experience and judgment of the investment team, led by the CIO, play a crucial role in evaluating whether insights from management interactions and industry analysis align with Alchemy’s investment philosophy. Companies that meet both quantitative and qualitative criteria, and demonstrate an attractive risk-return equation, are included in Alchemy’s investment universe.

Continuous Monitoring and Risk Assessment

Alchemy embeds the principle of “better safe than sorry” into its investment framework. Portfolio companies are reviewed regularly to track performance and reassess the original investment thesis. The team continuously evaluates the impact of internal developments and external factors to determine whether corrective action is required.

Exit Philosophy and Portfolio Discipline

Alchemy does not operate with predefined exit prices or fixed return targets. Instead, it follows a disciplined philosophy of allowing strong performers to compound while exiting weaker positions when necessary.
A stock may be sold under three key circumstances:

• When the original investment thesis no longer holds due to external changes or company-specific actions
• When portfolio rebalancing is required to manage position sizes
• When the risk-reward equation turns unfavourable and superior alternatives emerge

Backed by a long-term track record and a strong foundation of research-led decision-making, Alchemy remains committed to continuous learning and adaptation. This ensures robust investment processes that stay aligned with evolving market realities and consistently aim to meet investor expectations.