"While a traditional fund charges various sorts of fees that hinder capital growth, True Beacon charges 10% only on the gains" Nikhil Kamath, Zerodha

In a tell-all interaction with BW Businessworld and BW Disrupt, Nikhil Kamath of Zerodha speaks to Urvi Shrivastav, Editorial, Bw Businessworld about his venture True Beacon, customer wealth management, and the crowded stock market.

How did True Beacon start? What is the story?

After 10 years of building India’s largest stockbroking platform, Bangalore-based unicorn Zerodha, now responsible for 15% of all trading volumes in the country, the founders decided to disrupt the asset management industry. We are building on Richard Pattle’s and my capital market expertise and track record in the investing space. True Beacon was established in early 2019 to change the way UHNI and HNI build wealth.

What does True Beacon do? What is the agenda?

True Beacon serves several hundred sophisticated domestic Indian and global clients who want to capture India’s economic and equity market growth. True Beacon One - a Category III Alternative Investment Fund - employs a defensive hybrid strategy, investing in Indian large-cap equities to capture market growth. Combined with a long-short component to hedge and protect our equity holdings, True Beacon One drives an alpha over shorter market cycles. The Fund aims to outperform the index by at least 6% per annum on a multi-year basis. This Fund, launched in September 2019, has returned an absolute performance of 72% since inception.

How does True Beacon make a dent in the already crowded stock market?

The company is built on client alignment through a zero-standing fee model, a conservative investment approach, together with liquidity and tech-enabled transparency. While a traditional fund charges various sorts of fees that hinder capital growth, True Beacon charges 10% only on the gains made at the end of the financial year, on a high-watermark basis.

How has consumer wealth management changed in the last year as compared to the time before that?

The pandemic has allowed people to investigate their finances carefully and made them realize the importance of wealth management. It has improved financial habits, especially for those who do not work in the financial services industry. While few have taken charge of their investments, many have decided to go through the asset-management route. One stark difference that I have noticed is investors’ initiative to be fully aware of the product they are entering. They do not act as laymen and make sure that they thoroughly research on their end, before investing their money.

How sustainable is this change in consumer mindset?

It is very difficult to predict anything, during such uncertain times. However, I believe that this is a positive change and once market participants view the tangible benefits of the same, they would tend to stick to the routine. Today, sub 5% of the Indian population is directly or indirectly exposed to financial markets, and for this number to grow we need a change in our financial habits.

What are some of the new products you are working on?

It is an exciting time for the team, in terms of new projects coming along. In the month of May, we launched a fund, True Beacon Global, for global investors based in Gujarat’s Special Economic Zone (SEZ), GIFT City. True Beacon Global is the first operational Cat-III AIF in GIFT City.

We have also launched True Beacon Two, a dynamically managed equity and fixed-income fund. It invests in India's largest 200 companies to capture value appreciation, combined with a sovereign-backed debt component to hedge and provide a consistent revenue stream.

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nikhil kamath Zerodha True Beacon stock market investment

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