How the founder of Waterfield Advisors invests her money

Soumya Rajan, founder of Waterfield Advisors, is part of a much-envied minority: those who have been awarded an IPO allocation for dream stocks like HDFC Bank, ICICI Bank and TCS. Yet Rajan, who was a banker before moving into wealth management, still remembers the days when she had to fill out physical application forms for IPOs. The amount invested in these stocks was small, but they have been a beautiful reminder to her of the power of compounding.

Rajan, however, has also seen his share of bad investments. He bought LIC policies in his first few years on the job and, like many other insurance policy holders, he too lost them when he decided to stop paying the premiums. In his early days of stock investing, he too bought penny stocks on the advice of friends, and they have stayed that way over the years. His personal portfolio journey is similar to what most of us have seen: some hits, some missteps, but no undue aggression or risk-taking. Much of this is likely to be reflected in his conversations with clients.

Today, Rajan runs one of the largest wealth management firms in India, one that is in the midst of rapid expansion. “The pandemic was good for us,” he explains. “People had more money to invest and our assets grew.”

Waterfield Advisors, his firm, is named after a street in Bandra where Rajan started his career in finance. It has 200 clients and $4.3 billion in assets compared to $1.6 billion some five years ago. His staff has grown from 30 to 150 in just 2 years.

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Rajan has a classic balanced portfolio: 50% equities, 25% debt, 5% gold, and 20% alternative funds. Most of his equity portfolio is in large-cap stocks (55% of equity portfolio) and he is looking to grow it further.

“Quality names have underperformed recently, so there is an opportunity to accumulate quality large-cap stocks. We have seen incessant sales from FII in recent months on quality blue chip names. When the tide starts to turn, these will be the first to recover,” he told Mint.

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As much as 25% of your stock portfolio is in passive strategies or strategies that have some passive element.

On the debt side, Rajan is sticking with target maturity funds and reduction strategies. These types of schemes, if tailored to your goals or time horizon, can deliver highly predictable performance. About 10% of his portfolio is in international funds and stocks.

“International funds and stocks provide geographic diversification and with a stronger dollar index, there is potential to further improve returns over the next 2-3 years,” he added.

Rajan dipped his toes in gold as an investment in March 2020 and has held on ever since, seeing it as a hedge against inflation.

“Alternatives exposure is primarily to PE and VC Funds with exposures to Waterfield Fund of Funds and Women-Founded IDAs,” Rajan said.

Despite her relative conservatism, there are parts of Rajan’s portfolio and investment style that stem from being a wealth manager and owner of a large company. Those looking to emulate it should keep this in mind.

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Alternative assets in particular have minimum ticket sizes of around $1 crore and are only available to high net worth investors. It’s his journey that’s most instructive, with both hits and misses, like penny stocks and LIC policies along the way. Its current portfolio can be summarized as follows: ‘diversified and tilted towards blue chip equity, low cost target maturity debt funds’.

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