Wealth of words: How Deepak Shenoy turned a blog into an ₹800 cr PMS
5 min read 27 Jun 2022, 12:37 AM ISTDeepak Shenoy, who now plans to enter the MF industry, tells Mint how he started his successful PMS venture

Deepak Shenoy’s entry into investing was quite by accident. Today, though, his company Capitalmind manages assets of around ₹800 crore in its portfolio management service (PMS). Shenoy, an engineering graduate turned investment guru and the founder of Capitalmind, has since applied for a mutual fund licence and is also exploring the launch of an alternative investment fund for non-resident Indians (NRIs).
Yet, a little over nine years ago, Shenoy was just managing a blog, penning down his thoughts on macroeconomics and its impact on markets and sustaining it through subscriptions.
Shenoy’s story goes back all the way to 1998, when as an engineering graduate, he got into investing. “It was by accident," he tells Mint. Shenoy was developing a software to compete with Tally, the ubiquitous accounting package that Indian businesses use, and so began studying company financials. By 2005, however, he had sold the business. Instead, he now wanted to develop a software to help traders deploy algorithms in India’s nascent equity market.
“The first few online brokerages were coming up in the early 2000s like Sharekhan and Reliance Money. I felt that the time for algo trading had come," he says. Within a few years, he changed tack—developing algos which he and his partner would themselves deploy. “I moved to Mumbai in 2007, the day after the market collapsed 30%," he recounts. “Our hedges protected us and even made us money. But it was not all smooth sailing. At one point I went long the market in a leveraged bet and lost a great deal of capital. Why? Someone told me that shorting was not patriotic. Moral of the story: leave patriotism at the door while taking investment decisions," he says with a chuckle.

Volatile markets and other issues, including his wife’s health problems, convinced Shenoy to stop prop trading and get out of Mumbai. He relocated to Gurgaon where he started working for an algo trading company. “The business did well and the company eventually co-located at the stock exchange after I left," he adds.
Separately, Shenoy was pursuing a new passion. “The 2009 financial crisis also brought home the importance of macroeconomics in determining investment success," he says. “I began blogging about macro and its impact on markets," he added. After seeing the growing interest in his writings, Shenoy decided in 2013 to work full time on his content. Again, there were missteps along the way. “I was focusing on Youtube videos in 2011, long before Indians were able to access cheap data and Youtube usage had exploded. I was just too early," he said. However his writing attracted a significant following.
“In 2013, when I took this up full time I had decided that unless I get my first hundred subscribers in one month, I would stop blogging." Fortunately for him, readers answered his call. Shenoy took a research analyst licence in 2015, putting out stock recommendations and charging users a subscription fee. Before long however, readers wanted more than research and recommendations. “They wanted someone to manage money," he said.
This gave birth to Capitalmind, as a portfolio management service in 2017. But, it was not all smooth sailing in the beginning. “Demonetization happened in 2017, followed by the 2018 budget which imposed long term capital gains tax. We saw an ugly drawdown of 20-25% at that time, in our very first year". 2018 and 2019 continued to be a struggle for the fledgling portfolio manager. “Our custodian was IL&FS (which was also the custodian for most PMS managers). When IL&FS went under, we had to migrate customers to a new custodian — ICICI Bank," he says.
The same year, Shenoy’s team developed a momentum investing strategy driven by an algorithm and that changed their fortunes. Shenoy explains this: “The momentum strategy was 50% in cash by February 2020, before the covid crash. As the market recovered, it automatically bought fast growing companies such as pharma in May. Between 1 March 2020 and 31 March 2021, it was up a startling 61% (Nifty was up 35% over the same period). The outperformance continued all the way to October 2021."
Capitalmind, however, isn’t all about momentum. There are three major strategies — momentum, multicap (the first strategy which was launched in 2017) and market index funds. “The last strategy is extremely simple. 66% is in a Nifty ETF and 33% is in Nasdaq ETF. After overseas flows were stopped in February, we have replaced it with a Nifty 150 ETF," he says. Capitalmind charges a flat 1% for its momentum and multicap strategies and 0.25% for its passive strategy. “Unlike other PMS products, we have done away with performance fees. We think they incentivize the manager to take risks," Shenoy said.
The Momentum and Market Index portfolios, launched on 5 March 2019, have delivered CAGRs of 22.98% and 10.87%, respectively. The multicap portfolio was launched on 3 November 2017, close to a market peak in mid and small caps. Its CAGR since inception is just 4.41%. “This is post our fees. We calculate NAV with the same regulatory rules as mutual funds do, which is unique among PMS, who typically account for some fees only at the end of a year," says Shenoy.
Capitalmind also has advisory assets of about ₹1,500 crore. “Some customers don’t need us to manage all their money since they have other investments including mutual funds, stocks, fixed income, etc., which they execute through a family office. We advise them on their overall portfolios and use our analysts and quantitative process to help them take action or allocate appropriately," says Shenoy.
In its core PMS business, it is the momentum portfolio, managed by Anoop Vijaykumar, that really stands out and accounts for almost half of Shenoy’s AUM, at ₹370 crore. A different version of the momentum strategy is also available to users on Smallcase. However, the momentum portfolio has been underperforming since October 2021. It is down 12.8%, compared to 6.9% on the Nifty in the past six months as of 22 June. It is currently sitting on 50% cash. Much of Capitalmind’s future success will hinge on whether it is able to recover.
But Shenoy believes that the nuts and bolts also matter. “We report a daily NAV, and we’ve brought down custodian fees as well as account opening times for new investors to 3-4 days. Our tech is also self-developed rather than off the shelf. In the long run, there is more to investing experience than returns," he adds. As he waits to enter a crowded mutual fund industry, this focus on customer-ease and Shenoy’s innate ability to explain macro economics and personal finance to the general reader, may just turn out to be the differentiating factor he needs.