Invest long term, invest in India: Quant founder Sandeep Tandon

   2023-05-24 18:05

“Everyone wants to be the next Warren Buffett of India,” Tandon, who is the CEO of Quant Mutual Fund, told Mint in an interview for the Guru Portfolio series. “I don’t have any investment guru and I don’t try to mimic anyone’s strategy.”

Any visitor to Quant’s office in Mumbai is immediately drawn to the flowchart in the boardroom there. The flowchart, drawn up in 2012, predicts a biological disaster happening in 2022. It wasn’t off the mark by a wide margin. The Covid pandemic struck in 2020 and the nation was shut till early 2022.

Graphic: Mint

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Graphic: Mint

The chart also predicts that the coming years will not be rosy for the markets. An economic war and deteriorating weather conditions, among other setbacks, will supposedly keep the market lukewarm till 2030. The Quant Mutual Fund team swears by this chart’s accuracy. And Tandon himself credits it to Quant’s dedication to decades of data gathering. He has reportedly spent more than $22 million (about 180 crore) collecting wide-ranging data points that include weather patterns, geopolitical happenings, and market sentiment analysis over the years. This data is the lifeblood of Quant’s investment operation.

At Quant, there is no star fund manager. To be precise, proprietary framework and data is the star manager here. Fund managers can choose stocks from the basket that their framework has suggested but cannot override its suggestions.

Despite all the complexity that Quant Mutual Fund deals with, Tandon prefers to keep his personal piggy bank simple. His mantra is, “Invest long term, invest in India, and think value for money.”

Edited excerpts from the interview.

Imagine that you have 100 today. How would you invest that money?

I am a firm believer in India and its long-term prospects. So, 99% of my net worth is invested in India. The other 1% comprises some investments that I made long back in international private equity. That forms a minuscule portion of my portfolio. A bulk of it, around 50%, is in what I call strategic assets. This comprises the whole ownership I have in my company (Quant Money Managers). For this, I have a horizon of 10-20 years. This timeframe is realistic as I won’t be able to enjoy the fruits of my work in, say, 50 years from now. Long-term should be matched with reality. After 30-40 years, what will I do with all the money?

The other 25% of my portfolio is in hard assets. This includes the house I live in and two other properties that our family owns. You see, owning a house increases my risk appetite as it gives me security. My brother and I together bought our first house in 1997. My other assets also includes a small portion of gold.

The remaining 25% of my portfolio is allocated to what I call liquid assets. This includes mutual funds, (both debt and equity) and other contingency funds. I only invest in mutual funds run by Quant. I have no exposure to individual stock holdings.

How often do you rebalance your portfolio?

There is no specific time as such to rebalance it. But it’s natural to look at my allocation once a year during the tax filing period (around March). Also, rebalancing happens on an ongoing basis. It is difficult to asses the value of my real estate and churn my company ownership on a regular basis. But I keep it as a rule to review my company ownership and real estate every five years. Whereas for financial assets (like mutual funds), I rebalance it once a year.

How did you get interested in investing?

I was in college during stock broker Harshad Mehta’s heydays and witnessed the euphoria in the markets then. I somehow managed to convince my father and uncle to sell all their stock investments. The markets went up another 20% but then it crashed significantly. After that episode, my father and uncle handed me their investments and told me to invest that money. That’s how I really got into the markets. You can say, that’s how I got my first seed capital.

I have never taken any money as salary from Quant Mutual Fund since it was making losses. We took full ownership of the mutual fund business (by acquiring Escorts Mutual Fund) in 2018 and it takes some time for any asset management company to become profitable. I thought the company can make better use of its money rather than paying me.

You must then be wondering how I managed my expenses? So, all the personal spending I do is from the wealth I accumulated over the years. It’s the long-term investments (in stocks) I made over the course of my working life (before Quant). That has worked pretty well in my favour, although some stocks did well and some failed. I was not allowed to trade in stocks in my personal capacity as I was an employee.

People think of you as more of a trader than an investor. How would you define yourself?

My biggest investment is a long-term asset which is in the form of my company ownership. If we talk about Quant’s mutual fund schemes, we can divide our portfolio into three categories: Long term, medium term and short term. People look at our high turnover rate and assume that we only think for the short term but that is not the case. A part of our portfolio is also dedicated towards longer-term investments and we will hold a stock for years if the data tells us to do so. For instance, we invested in Stylum in 2019 and haven’t sold a single share to date. At that time, it was trading around 200 but now it has touched 1,600.

Have you invested in cryptocurrency or any of the digital currencies?

As a firm, we keep an active eye on the whole cryptocurrency and digital asset markets. Although, as a mutual fund, we are not allowed to invest in cryptocurrencies, we do a lot of research on that front. It gives us an understanding of the risk appetite of young investors and that helps us analyse the market situation better.

If people are getting interested in cryptos, we get an indication that young investors are getting animal spirits in the markets. And I say young people because majority investors in such asset class comprise mostly the younger generation. I would say the relevance of cryptos has come down in the past few months but we continue to keep an eye on it.

What money lessons did you get from your parents?

My dad was a banker who invested regularly. He always told me not to run after money. I have tried to follow that in my life. I don’t have any goals or aim, saying I want to earn this much money by this time. At Quant Mutual Fund also, we do not have any targets related to how much money we should be earning. We have other operational measures.

The second things is to know the value of money. While I was a kid, I use to tell my dad that I wanted to take a cab whenever I got late but he would always insist that I take the local train. He told me that going by train is cheaper and also faster. His whole point was that we should not splurge money on unnecessary things. Even now, whenever I travel, I opt for an economy class seat rather than buying business class. It is comfortable for me, and they both take us to the same destination anyway.

So, where do you prefer to spend your money?

Making money and not living a comfortable life is not something I recommend. For instance, I live just next to my office because that makes me comfortable. I don’t want to spend much time commuting. Also, I like to travel, visit different places although I’ve not travelled much after the pandemic. I like going to new places and trying out new things. I have travelled to Prague and Czech Republic. I meet and interact with the locals to know their culture. I don’t go there and say, I am vegetarian or I can eat only this. Instead, I tell them, what do you have to offer? That’s What Quant also does. We do not put constraints on our choices.

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