Axis Core & Satellite Portfolio

Product Proposition

Investment Thesis

Core Allocation (50%-70%)

• Based on the concept of Brand investing
• Focus on identifying businesses with strong brand presence
• Targets steady compounders held for the long term (5 years+)
• Provides portfolio stability as stocks are relatively low beta in nature

Satellite Allocation (30%-50%)

• Based on the concept of Efficient Capital Allocators
• Identifies companies with a track record of superior capital allocation
• Focuses on stocks with cyclical earnings and currently mispriced opportunities
• Acts as a return “kicker” with a medium-term investment horizon (18-24 months)

---

Why Invest in Brands?

---

Brand Attributes

---

Frameworks in Investment Approach - ValueTrack

• Axis Alternatives Equities proprietary framework of ValueTrack has data and studies of the past 21 years, recording and understanding fundamental factors that cause stock outperformances.
• It is comprehensively updated every quarter, including fundamentals, stock performances, and attributions of more than 1,000 companies.

---

Evolution of a Capital Allocator

---

Identifying an Efficient Capital Allocator

---

Capital Allocators: Change in Management Focus

Reliance Industries

• Reliance Industries is India's largest private-sector company with interests in oil & gas, textiles, retail, telecom, and infrastructure.
• Its petrochemicals business is vertically integrated with an output of more than 20 million tons.
• It also operates the world's largest single-location refinery.

Key Highlights

• Moving towards new-age businesses leveraging its telecom base and digital platform
• B2C businesses such as telecom and retail are more stable than B2B oil & gas businesses
• Lower impact from commodity cycle volatility
• Lower working capital requirements compared to traditional oil & gas businesses

---

Capital Allocators: Change in Management

Larsen & Toubro (L&T)

• Founded in 1938, Larsen & Toubro is India's largest Engineering & Construction company.
• Operates across infrastructure, power, heavy engineering, automation, hydrocarbons, IT services, and financial services.

Key Highlights

• Diversified operations reduce earnings cyclicality
• Increasing focus on high ROE businesses
• Restructuring SPVs under concessions business as part of an asset-light strategy

---

Capital Allocators: Sector Consolidation

Mahindra Finance

• Began as a captive financier of Mahindra Utility Vehicles in the early 90s.
• Has evolved into a diversified financial services provider focused on rural markets.

Key Highlights

• Presence across more than 3.6 lakh villages
• Diverse loan book across utilities, tractors, cars, and SME finance
• Strong rural and semi-urban distribution network
• Market share gains expected across multiple lending categories

---

Capital Allocators: Regulatory Changes

Brigade Enterprises

• One of the leading real estate developers in South India with a strong presence in Bengaluru.
• Operates across residential, commercial, and hospitality segments.

Key Highlights

• Regulatory changes favor large developers with strong balance sheets
• Sector consolidation expected to improve market share and operating leverage
• Strong brand value and leadership position in South India

---

Performance (31st Mar 2024)

---

Portfolio Details as on 31st Mar 2024

---

Portfolio Features

---

Fee Structure

Fixed Management Fee

• Investment Type: Lump sum (₹50 Lakhs or more at PAN level)
• Fixed Management Fee: 2.5% charged quarterly

Fixed Management Fee with STO Option

• Investment Type: STO with 5 or 10 instalments
• Minimum Investment: ₹50 Lakhs or more at PAN level
• Fixed Management Fee: 2.5% charged quarterly

Fixed + Variable Management Fee

• Investment Type: Lump sum (₹50 Lakhs or more at PAN level)
• Fixed Management Fee: 1.5% charged quarterly
• Variable Fee: 20% over hurdle rate of 12%

Fixed + Variable Management Fee with STO Option

• Investment Type: STO with 5 or 10 instalments
• Minimum Investment: ₹50 Lakhs or more at PAN level
• Fixed Management Fee: 1.5% charged quarterly
• Variable Fee: 20% over hurdle rate of 12%

---

Investment Approach

Investment Objective

To generate long-term capital appreciation by investing in a diversified portfolio of equity and equity-related instruments across market capitalizations.

Investment Strategy

Axis Core & Satellite Portfolio follows a compact portfolio strategy built on a Core & Satellite framework designed to create a cycle-agnostic portfolio focused on sustainable alpha generation.

Core Portfolio

• Invests in fundamentally strong businesses
• Focus on companies with strong brand presence

Satellite Portfolio

• Invests in companies with cyclical business models
• Focus on businesses with superior capital allocation track records

Strategy

• Equity

Benchmark

• Nifty 50 Index TRI

Asset Allocation

• Equity & Equity Related Instruments: 80%-100%
• Debt & Money Market Instruments: 0%-20%

Strategy-Specific Risk Factors

• Risks associated with investments in equities
• Risks associated with investments in fixed income instruments
• General risks associated with investments

To know more details and other risk factors associated with the investment approach, please refer to the Disclosure Document on www.axisamc.com and Contribution Agreement.