About Us

Investment Philosophy - InQuBe

Our Investment Philosophy reflects what we, as an organisation, believe will generate a good return on equity investment for our investors in the long term. It dictates our goals and guides decision making.
Alpha (a) is a term used in investing to describe an investment strategy's ability to beat the market.
Alpha is thus also often referred to as excess return or the abnormal rate of return in relation to a benchmark, when adjusted for risk. Essentially, it means doing better than the crowd without taking disproportionate risk.

Our Investment Approach

The market price of any security reflects the consensus expectations about its future earnings and the risks associated with the outlook. The market also adjusts every day, as it prices the new information that comes in. For investors to predict the future change in the security price, they need to have more accurate expectations about the future earnings and risks pertaining to the security than the consensus. Hence, the source of alpha for an investor is ‘better expectations’, and one needs to have one of the following three edges to attain the goal.

INFORMATION EDGE: Collecting Superior Information

Analysts and portfolio managers strive to collect superior information about the business and the management of the company. They try to generate superior earnings forecast and the balance strength of the company and the industry, thereby trying to 'beat the market' on information edge.

This is an important source of alpha for an investor. However, over the years, retaining the information edge has become more difficult and expensive. With a whole lot of investors trying to collect superior information, how can an investor be sure to continuously have accurate and material information about the companies, ahead of others, all the time?

ANALYTICAL (QUANTITATIVE) EDGE: Processing Information Better

Even if you don't have material information earlier than the crowd, you can still generate better outcomes if you are able to process this information better. Investors develop models and algorithms with enhanced predictive powers to forecast the next move. Fund managers who invest based on some pure formal analytical models are quantitative managers. Here, the goal is to try and beat other investors based on the sophistication of procedures or analytics. The analytical edge can be quite useful until it gets copied by many, and then it may stop generating superior returns.

BEHAVIORAL EDGE: Exploiting Behavioural Biases

As the name suggests, this edge is achieved by superior behaviour in reacting to the inputs available to maximise alpha. Modern finance assumes people behave with extreme rationality. However, researchers in behavioural finance have shown that this is not true. Moreover, these deviations from rationality are often systematic. Behavioural managers try to exploit situations where securities are mispriced by the market because of behavioural factors.
At Bajaj AMC, we endeavour to combine the best of these edges.

Fixed Income

For the fixed income market, the most important aspect is the quality of the asset. Our focus is to create an investment universe of borrowers who have the ability to service and pay back the debt. We evaluate whether there is adequate cover and understand the covenants wherever applicable on securities.

Next comes liquidity management. Here, we use tools to monitor liquidity and duration of the portfolio. It is important to conduct the stress tests regularly to understand portfolio liquidity risk.

Returns have to be evaluated under the lens of risk-adjusted return. We wouldn’t compromise on the quality curve for higher returns. Right selection of security and duration seeks to provide the investors reasonable returns without taking disproportionate risk.