As Anirudh pointed out that his desire to “make some rules out of it, make some systems out of it,” naturally led him to explore technology-based solutions, which eventually culminated in the development of ASK’s proprietary quant-based framework, Ind Asset (AID).
Anirudh was speaking at the second edition of the AIF & PMS Conclave—powered by ET Markets—spanning two days and featuring 26 thought-provoking sessions.
AIF PMS is India’s largest summit on alternative investing funds (AIFs) and portfolio management services (PMS), with some of the finest financial minds in India—including CXOs, VPs, founders, MDs, and other experts—coming together to offer expert analysis of this emerging investment space. During the recently concluded second edition, the experts demystified this space through the investors’ lens keeping in view market sentiments, volatility, economic challenges, and political climate.
The four pillars of the Ind Asset framework
Quantitative investing, which leverages technology to systematise investment decisions, proved to be a natural fit for ASK. Anirudh explained: “The stock market is not easy. You need rules and systems to make sense of the complexity, and technology allows you to create these systems.”
The team at ASK Investments conducted in-depth research in 2010 to develop their quant investing framework. During their interviews with fund managers and retail investors, they identified key behavioral patterns that formed the foundation of their framework. These behavioral insights came to be identified as the “four pillars” of Ind Asset:
- Capital preservation: Anirudh emphasized that capital preservation is the primary goal: “Capital is the only real thing in the market. You have to preserve your capital at all costs.” Anirudh gave his verdict to favor low-risk, medium-return strategies over high-risk, high-return ones.
- Benchmark outperformance: Anirudh stressed the importance of outperforming benchmarks within a reasonable timeframe. “If you’re not able to outperform the benchmark over a three-year period, serious changes need to be made,” he noted, adding that this is a critical measure of an investor’s performance and long-term sustainability.
- Avoiding biases: One of the most significant challenges in investment is overcoming biases. Anirudh candidly discussed how many fund houses succumb to biases, often committing too heavily to certain sectors or themes. “You cannot be biased to a particular set of investments… The market is always a game of valuation and relative change,” he remarked, thus affirming the importance of being flexible and adapting to market conditions for stakeholders.
- The power of multi-factor models: Anirudh discussed the advantages of using multi-factor models over unifactor ones: “Numbers don’t lie. Multi-factor models help you avoid the biases that human minds are susceptible to.” Staying objective, especially during volatile market conditions, remains the key, maintained Anirudh.
Human-machine collaboration
When asked about the role of technology versus human judgment, Anirudh stressed the importance of blending both: “Even if you have the best algorithms in the world, without humans, they are nothing. A human plus algorithm combination is what is required in today’s world.” He observed that the synergy between human experience and algorithmic precision is crucial for managing complex investment decisions in a rapidly changing market environment.
Beating the benchmark
Anirudh shared some key achievements, noting that ASK Investments had beaten the benchmark by almost 2x over the last four years. He attributed this consistent outperformance to their disciplined approach to capital preservation, unbiased investing, and early recognition of emerging trends. He explained: “We never take high-risk, high-return decisions. We always focus on capital appreciation.”
One notable success story that Anirudh mentioned was ASK’s early identification of the Capex theme in India. The government’s substantial capital expenditure increased from ₹2.5 lakh crore to ₹11 lakh crore over the past few years, a move that sparked growth in sectors like railways, defence, infrastructure, and power. “This massive Capex jump in India has worked wonders for the old economy,” Anirudh remarked.
The greed and fear index
A unique tool that ASK Investments has developed is the Greed and Fear Index, which helps them gauge market sentiment. “The stock market oscillates between greed and fear,” Anirudh explained. “When fear is at its peak, good investors look for bargains.” The index allows ASK to identify undervalued stocks during market sell-offs and invest strategically in those that are poised for recovery.
Anirudh gave a vivid example of this in action during the Covid-19 pandemic when Tata Motors was available at a historically low valuation: “In 2020, Tata Motors was available at its minimum price-to-book since listing. Those are the opportunities that markets give you, but you need a system to grab them in time.”
ASK’s investment approach is not tied to any one style, such as value or growth investing. Instead, they employ a flexible strategy that adapts to market conditions. “90% of funds in India are either value, growth, quality, or safety,” Anirudh observed, adding that their approach encompasses all these styles. This adaptability has helped ASK maintain its competitive edge in various market cycles.
A deep dive into ASK Investments’ strategic framework showcased how a blend of technology, flexibility, and discipline has driven their consistent success in the equity markets, a note for every investor in today’s dynamic environment.
