IIM Lucknow Students' Fund, Credence Capital, outperforms the NIFTY fifth year in a row
| February 24,2012 04:29 pm IST
In what has been amongst the toughest years in the equity markets, IIM Lucknows student run fund, Credence Capital, has proved its mettle yet again. While the benchmark Nifty, saw a fall of nearly 14%, Credence generated a return of 5% in its equity fund.
However, the show stealer was the stellar performance of the derivative fund which returned a whopping 35%. For those who have tracked the performance of Credence Capital, this result would come as no surprise, as the fund has made it a habit of beating the markets consistently since its inception. The investors, all students of IIM Lucknow, were amply rewarded for posing faith in their in-house fund managers, Team Credence Capital.
Credence Capital, a fund set up with voluntary contribution from IIM Lucknow students came into existence in July 2005, and has been going from strength to strength. Batch after batch, students pool in their funds, to be managed by Team Credence Capital. This is the seventh year of its functioning and the fund has gained immense popularity across financial circles. The students of the class of 2010-12 had pooled in funds at the beginning of their academic session in July 2010.
These funds were managed diligently by Team Credence Capital through the tumultuous 2011, and by January 31, 2012 the fund had generated handsome returns for its investors. The consistent performance of Team Credence Capital has earned it immense admiration and faith amongst the student community both within and outside IIM Lucknow. Testament to this fact is the roaring response the team witnessed for its fund launch for the new batch in October 2011 (aptly named Operation: Bottom fishing), in spite of the falling markets. Seeing the success of the fund in IIM Lucknow, other premier B-schools are also in a race to setup similar funds in their institutes under the mentorship and support from Team Credence Capital.
The key is to remain informed, diligent and most importantly - disciplined at all times. The markets provide ample opportunities to make profits while keeping risks to a minimum say the Credence fund managers. Credence is no run-of-the-mill kitty but a stickler for rules. More than profit maximization, it was risk management and preservation of capital that was the key.It is not that we always made money. Strict stop-losses were crucial to our success. Keeping 5% to 10% stop-losses and laying emphasis on supports and resistances based on technical analysis were crucial to our performance, the fund managers opine. To formulate strategies and build their portfolio, the fund managers of Credence Capital apply both fundamental and technical analysis.
However, every member of the team is of the view that being a good team player was the most critical factor to success, as every investment decision had to be approved by a majority of the members. There was no room for individual egos while managing the fund. Apart from managing the fund, Team Credence Capital regularly posted newsletters updating the students on the happenings of the market in the elapsed week and its expectations for the forthcoming week. The experience of managing other peoples money responsibly and being accountable to their class mates, prepared the budding fund managers for challenges that the industry would pose to them in their future roles. To maintain transparency, the team periodically released the funds NAV to their class mates. The concept of Credence Capital is purely a student initiative in which the institution is not directly involved.
The faculty is however, extremely appreciative of the fact that theory sessions coupled with real time experience of managing money would mould students into excellent fund managers. Year on year, the students follow a rigorous procedure to select the fund managers. Potential fund managers are tested not only on their ability to analyze companies, but are also tested on their ability to work in teams and their general awareness about the economy. Of the applicants, the best students are handpicked and groomed meticulously before they start to handle the funds. This process has ensured that Credence can maintain its enviable track record.