IIM Lucknow’s student run fund, Credence Capital, continued its legacy of outperforming the market as it generated a handsome return of 20.10% on its Equities Fund compared to the NIFTY’s 18.6% rise. Even more impressive was the performance of the Derivatives fund, which generated 29.8% returns over this period. This marks the sixth consecutive year of market trumping performance by the fund, which was launched by students of IIM Lucknow in 2005.
|Fund / Index||Returns (2011-13 Fund)*|
|Credence Equities Fund||20.1%|
|Credence Derivatives Fund||29.8%|
|S&P CNX Nifty||18.6%|
* Fund Closed. Returns are absolute returns over the period 10th October 2011 and 11th February 2013
The fund is set up with contributions from the student body at IIM Lucknow. Every incoming batch pools in its funds to be managed by the Fund Managers at Credence Capital. The class of 2013 saw its fund launch in October 2011, with the tremendously successful “Operation Bottom Fishing”, a theme which reflected the attractive valuations and opportunities available in the market. The eight fund managers, whose investment philosophy ranges from value-investing to exploiting arbitrage opportunities and to derivatives trades like covered call strategies, diligently managed the pool throughout the two years and have ended their term by decisively outperforming the markets, generating handsome rewards for all their investors. The incoming batch is set to uphold this legacy, as evidenced by their whopping Quarter 1 results where they achieved annualised returns of 33.14% and 52.52% in the Equities and Derivatives portfolio respectively.
Devvrat Mohta, one of the team members said, “Investment is not a perfect science and sometimes our decisions are wrong. In such a scenario it becomes imperative that we close our position and get out, which is psychologically tough, because it hurts peoples’ ego to accept they are wrong. But the way the club members operate makes it easy for a manager to quickly accept a mistake and move on.” The team also emphasises the importance of strict discipline and avoiding excessive risk as they aim to preserve capital.
As the fund’s legacy has grown, the students find outsiders, including alumni, frequently writing in to enquire specifically about the fund. The B School community across different campuses also seems to be enamored and inspired by their success; the fund has spurred many other campuses to launch similar ventures. Another team member, Shraddha Gupta says “We really welcome this trend and would be happy to offer active support and mentorship to any other campus.”
The potential managers underwent a month long selection procedure where they were not only tested on their ability to analyse and select companies, but also on their awareness of the economy, including a mock trading event. After selection the students underwent a thorough one month training program before they started handling the funds.
Besides managing the fund, Team Credence also conducted regular informal sessions for the batch, where they discussed the major updates in the Indian and Global markets, and debated important issues in the financial markets. Besides helping them academically they also credit the fund for the experience and maturity that comes with being accountable to their batch mates.
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