Born in a family with a very strong ‘equity culture’, it was but natural that Hiren Ved, CEO, Director, and CIO, Alchemy Capital Management would gravitate towards the stock market. Hiren started his equity market career in 1991. He joined Alchemy to spearhead its asset management business in 2000 as the 4th partner along with Rakesh Jhunjhunwala, Lashit Sanghvi and Ashwin Kedia. Today, he manages/advises funds worth nearly a billion dollars across domestic and offshore mandates. BL Portfolio caught up to understand his personal finance philosophies, investing journey highlights and crucial lessons over three decades.
What does money mean to you?
Money is just a means, not the end goal. You need a basic amount of money to take care of your needs and comforts and a little bit for luxury. Money is obviously one of the parameters that people use to determine how successful a person has been. Though, in my opinion it’s not the most important parameter for success. Fortunately, in my profession, money is the by product of doing what I do with passion, and it gives me happiness.
When did you start investing?
My dad has been investing now for decades together. When I was still in school, he would take me to these AGMs and make me listen to Rahul Bajaj, Dhirubhai Ambani or HT Parekh. In college, I actually carried forward that interest. We teamed up with accounting professors and ran a stock market game. We were given paper money basically. We all used to report our trades to our professor and he would keep a log of it. While I was in college, during the vacations, I worked with a market research firm called IMRB. That was the first time I earned my own money and then I started to invest that money in the market during college time.
Do you remember your first investments?
Yes. I bought a share of Ponds, which then became part of Hindustan Unilever. I had invested in ITC. I don’t remember but I also invested in one or two very small companies, which finally went bankrupt, or didn’t go anywhere. So, that’s how I learned slowly and steadily. Whatever savings that I could gather, I used to always invest. Because our family had a long history of investing, for us the only avenue to put all your savings was in the stock market. I understood the power of compounding money very early.
There is a custom in our family now that whenever a new baby is born, the standard operating procedure is that you deposit the money to be gifted to the child in some stocks. Even if they can afford to buy one share or two shares, they would buy them. My dad and my uncle started this practice where they would gift some shares to a newborn, instead of giving cash.
Tell us about your portfolio allocation.
I keep a very small amount of money in money bank for any exigencies. But otherwise, I have no fixed deposits. I have no other fixed income.
Don’t you feel afraid that all of your savings is in the stock market?
Yes, many ask me this. ‘It’s all paper money, one fine day it can go down to half. Like it happened in 2008?’ I say no. I was thrown into the proverbial water at a very small age. So, I learned how to swim and not to be afraid of the water. The very concept that one needs to understand is that prices can fluctuate, but value in a good company keeps increasing. Compounding, like any other skill, has to be learned and I grasped it much earlier in life.
How did Alchemy happen for you?
When I started, I wanted to understand how investing works, how to do research, how to pick companies etc. In those good old times, there were very few brokers who were actually doing fundamental research. Kisan Ratilal Choksey was one such firm. I worked there for four and a half years. Then, I got an opportunity to work with Prime Securities, it was a very different setting. After 8-9 years, I thought now I know quite a bit of how this is done. It’s now time to become an entrepreneur, and do it yourself. And, we got talking, and at that time, Lashit Sanghvi, Ashwin Kedia, who are also other co-founders. They were very good friends. And also, Rakesh Jhunjhunwala.
Start-ups are a big thing today but in those days weren’t you apprehensive?
At that time, again, there were not too many PMS houses, so there was not too many professional people who were managing money for other people. We always thought that there would be a need to do something. And it was also a passion for us to find stocks and invest. So we said, why not invest for other people who don’t know how to do it? Or for those who need professional help? It was a bold move at that time. There was no concept of start-ups at that time. But yes, it was a startup in many senses. We literally started in a small office with with just one back-office person and and myself. Obviously, we’ve grown significantly since day one when we had five crores and seven clients
What are the financial goals that drive you today as an individual?
Well, I don’t have a any particular number in mind. I think I have enough to live a decent life. But beyond the point, the goal is more about the fun in the process. I want to make as much money as I can in my lifetime. And the beauty of the investing business is that there is no age bar. And as long as you are sane in the head, conviction in your gut, you can just keep adding.
I just want to keep growing my investments and obviously, I will use a little bit of it for me and my family. I also give back to society. Some of the money will go to my son as inheritance. I will only give him that much that he doesn’t become too lazy. So, that he uses it more as a backup and, and takes risks, like I did at some point in time in my life, and build something on his own.
You are fully invested into equities, but many are afraid to get into stocks now due to valuation concerns. Is that fear justified?
Many investors have this feeling that the markets are too high and they are trying to correlate what is happening on the ground because of Covid. They think markets are in their own world. But, the reality is something different.
There is this constant fear, because there is something which is called as the recency bias. Because you saw the Nifty at 7500 and in a year’s time plus you’re seeing it at 16,000 it’s not something that people can digest very easily. These valuations are not very excessive, if you look at where we are in the long-term profit cycle.
These days all the conventional valuation metrics seem to be out of sync when it comes to IPO valuations. How do you view new-age IPOs?
It’s good that the IPO market is doing well. A thriving IPO market always gets new investors to the market who then stay back as they then graduate from being pure IPO investors to secondary market investors. So, it increases the pool of participants. Start-ups and high growth businesses such as Zomato need to be valued differently as their current profitability may not be optimal because they are sacrificing near term profits for achieving rapid scale in a very short period of time. Having said that the end goal after a few years for these companies will also be the same as any healthy enterprise. They will have to improve their unit economics and generate sustainable cashflows and generate a decent return on capital invested. So, valuing these businesses require more ingenuity, vision and insight into how these businesses will unfold.
How can investors keep a level head be it bull markets or bear markets?
One, have a long term view. Nothing happens overnight.
Two, understand well what you own. If you understand what you own you will have the conviction to hold it.
Three, do what makes you comfortable. Don’t try to emulate others, no matter how great or successful the investor. You need to come to terms with your own personality and obviously work on building an aptitude for investing.
