If select schemes of top international fund houses and banks in India such as Goldman Sachs, Fidelity Investments, JP Morgan Chase, American Express and Standard Chartered Bank are reporting jaw-dropping, benchmark defying returns, don’t be surprised.

For, many of those calling the shots at these funds cut their teeth by burning their own money running a fund called Credence Capital at their alma mater — IIM-Lucknow.

In fact, several students of the present team handling the fund have already bagged summer internships at corporate biggies such as HSBC, Boston Consulting Group, Deloitte, Accenture and Cadburys.

Credence Capital, which is open only to IIM-L students, was started in 2005. Now, in its sixth consecutive year of outperforming the benchmark Nifty, the fund reported absolute return of 20.10 per cent in its equities fund and 29.8 per cent in its derivatives fund against Nifty’s 18.6 per cent return for the period from October 10, 2011 to February 11, 2013.

With 16 students as fund managers — eight each from 2011-13 and 2012-14 batches — and a total student investor base of 60, the present corpus of the fund is about Rs 10 lakh with the investible limit capped at Rs 50,000 for an investor. Besides equities and derivatives, the group recently moved into currency trading.

Multiple strategies

According to these finance whiz kids, the group has no single point winning strategy for picking stocks, but adopts a combination of multiple trading strategies such as value investing, bottom fishing, arbitrage opportunities, mathematical models, technical and fundamental analysis. These strategies keep changing with every new batch; the funds have to be liquidated at the end of a year. Handpicked through a rigorous month-long internal selection process, these fund managers are mentored and trained by their seniors in their new role. Interestingly, the group has been approached by other IIMs and B-schools, such as NITIE, S P Jain and MDI Gurgaon, to provide support and mentorship to set up similar funds.

Besides the experience of learning by investing their own money and getting a head start in job placements, developing market-specific skill-sets and the discipline to manage risks are the other key takeaways from the exercise, say students.“When I joined L&T Finance, I was not given any training and dived straight into work. Thanks to my stint at Credence Capital, work does not feel like work to me. It is all about having fun; so everyday feels like a vacation filled with the excitement and thrill of making money at the stock market,” says Navin Prasad Verma, an alumni, who is at present managing the portfolios of high net worth individuals at L&T Investment Management.

Short time window

“Unlike fund managers who get a time horizon of about five years to perform, we have only a short time window of one year in which the market could get beaten down as well. This time limit makes it an exciting challenge for us to prove ourselves and develop crucial skill-sets,” says Akshay Bhor of Team Credence Capital.

>badrinarayanan.ks@thehindu.co.in

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