Carnelian Capital Compounder Strategy

Fund Snapshot

Investment Philosophy

• Carnelian Asset Management believes that investing success is the result of making sound judgments over time. Decisions that are made “Objectively, Free of any prejudice” should be based on the “Probability of result” and the “Risk reward.”
• They think investing in excellent development firms managed by exceptional management at a reasonable price is a good idea.
• They’ve developed a proprietary quantitative and qualitative method to eliminate possibilities.
• They think that the margin of safety is not only found in price but also in thorough research.
• They think that one can never make money on borrowed convictions.
• they’re glad to be a contrarian when the risk-reward profile is favourable: regressing to mean mimicry.
• They believe in taking things slow and long-term. Investing is similar to watching grass grow.
• They prefer assured results to immediate returns.
• They don’t mind sitting on cash as long as they can’t find a better purpose for it.

Investment Strategy

The Carnelian Compounder Strategy is a multi-strategy mutual fund that uses its own MCO framework to achieve superior performance across market cycles. They in the Carnelian realm believe that investing success is attributable to making excellent judgments over an extended period. Good decisions are made “Objectively, Free of any bias”, taking into account “Probability of occurrence” and “Risk reward.”The Carnelian Compounder Strategy is a multi-cap, long-only sector agnostic strategy that aims to produce semi-permanent alpha and compound capital over a long period through the MCO framework. The Strategy is a unique and unusual mix of Magic (accelerated growth), Compounder (steady growth) & Opportunistic firms.An Alternative Investment Fund (AIF) is a privately pooled investment vehicle that gathers money from knowledgeable investors to invest with a particular strategy to meet specific goals.The Carnelian Capital Compounder Fund is a category III AIF that provides long-term alpha and capital growth. The minimum investment amount according to SEBI rules is INR 1 crore.

Unique Feature

Before spending money, they go through the unique forensic framework to explore the following: “CLEAR.”

C – Cashflow evaluation & Capital Allocation. No damns are given about earnings that aren’t linked to a cash flow conversion. Instead of relying on the amount of money coming in, they dig into the source of cash flow.

L – Underwriting Analysis, actual vs reported debt, contingent liability and likely future earnings implications

E – Analysis of Actual vs Expected Earnings, True Economic Profit vs Reported Profit, Discretionary vs non-discretionary profit

A – Asset Quality Analysis, Some worrisome points – huge built up in loans and advances, a large quantum of long duration inventories/receivables susceptible to value diminution, large payables are supporting large receivables/inventory, profits getting re-deployed in non-core/expensive/uncertain inorganic growth, profits getting into intangible assets/goodwill – without visibility of commensurate profitability, subsidiaries/JVs which require a constant infusion of profit without any visibility of returns.

R – Governance concerns of another company and related party transactions.

Carnelian Asset Management is an investment company that focuses on real estate and marketing as well.