MANAGEMENT INDEX OPTIONS PROGRAM INVESTOR PRESENTATION PURPLE TREE - - PowerPoint PPT Presentation

PURPLE TREE INVESTMENT MANAGEMENT INDEX OPTIONS PROGRAM

INVESTOR PRESENTATION

Date: 29th July, 2018

PURPLE TREE INVESTMENT MANAGEMENT

• Purple Tree is a boutique Investment Manager based out of Mumbai.
• Investments are managed by founder Jigar Shah, CTP(USA), MBA(Finance), B.E. Computers (click here to see his LinkedIn

profile)

• Purple Tree’s business is grounded in the belief that the scientific method can be profitably applied to the field of
• investing. Purple Tree uses a multi-strategy, systematic approach that invests long and short in Index Options only.

Who we are:

PURPLE TREE INVESTMENT MANAGEMENT

• 1. Higher returns irrespective of market direction
• 2. Stable & Consistent returns
• 3. Regular income – cashflows
• 4. Minimize drawdowns

Four Important Investment Objectives of Purple Tree:

PURPLE TREE INVESTMENT MANAGEMENT

Currently, there are only 2 equity investment vehicles available in the market –

• 1. Mutual Funds
• 2. Traditional PMS schemes

Both these vehicles invest majority of the corpus in cash equities only.

Purple Tree recognises and solves the inflexible and limited Investment Options problem through our flagship ‘Index Options Program’

Limited Investment Options for Investors:

PURPLE TREE INVESTMENT MANAGEMENT

Drawbacks of investing in Mutual Funds and traditional PMS schemes:

• 1. Lower risk adjusted returns
• 2. Returns are market dependent and inconsistent as they are

Long Only funds.

• 3. Absence of Advanced Investment Strategy & Technology
• 4. Higher Costs

PURPLE TREE INVESTMENT MANAGEMENT Overcoming the drawbacks of Mutual Fund investments:

• 1. Risk adjusted Returns
• Large Cap Mutual Funds have given 16.2% pa returns in last 6

years as compared to 36.9% pa returns given by Purple Tree with 30% lesser risk as evident from the volatility of returns.

• Purple Tree has yielded 5 times higher risk-adjusted returns as

compared to Large Cap Mutual Funds as evident from the Sharpe ratio.

Parameters Purple Tree Top Lcap MFs Nifty 50 Annual Volatility 9.25% 13% 11.5% Annualized returns 36.9% 16.2% 11% Sharpe Ratio 3.12 0.63 0.32 Correlation 1.00 0.13 0.36 Period Purple Tree Top Lcap MFs Nifty 50 1 month % +7.9% +2.9% +5.3% 3 months % +14.64% +2.35% +5.01% 1 year* p.a. +41.5% +11.8% +10.25% 2 years* p.a. +47.6% +16.7% +14.5% Inception* p.a. +36.9% +16.2% +11% *Returns are based as on respective FY end.

Top Lcap MF – Top Large Cap Mutual Fund Avg includes 1) ABSL Frontline Equity (G), 2) Franklin India Bluehip (G), 3) Axis Bluechip fund (G), 4)Kotak Bluechip Fund(G), 5)Tata Large Cap fund (G), 6) Indiabulls Bluechip fund (G) and 7) DHFL Pramerica Large Cap Fund(G).

13.8 18.8 24.1 30.2 46.4 65.7

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

RS IN LACS

CUMULATIVE GROWTH OF RUPEES 10 LACS INVESTED

Purple Tree Top Large Cap MFs Nifty 50

PURPLE TREE INVESTMENT MANAGEMENT Overcoming the drawbacks of Mutual Fund investments:

• 2. Correlation of returns with market and consistency
• Returns from Mutual Funds are highly correlated with the market

returns (>0.95) whereas Purple Tree’s returns have much lower correlation with the markets (0.36). This is due to the fact that Mutual Funds are long only instruments & do not short in falling markets.

• As evident in the graph, in 2015-16, when Nifty corrected for

majority of the year even Mutual Funds corrected, similarly in 2017-18, last quarter, Nifty corrected heavily leading to erosion of majority of the gains made by the Mutual Funds in 2017.

• Purple Tree gave positive returns in excess of 25% in 2015-16

even when markets were down and similarly outperformed in 2017-18.

• We can also observe similar trend in the last 3 months, where

Mutual funds gave 2.4% returns as against Purple Tree’s returns

• f 14.6%.

6.9% 17.5% 26.3%

• 9.9%

18.9% 10.3% 12.0% 19.8% 39.4%

• 3.6%

22.1% 11.8%

38.1% 36.2% 28.2% 25.3% 53.7% 41.5%

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

PERFORMANCE COMPARISON

Nifty Top Lcap MFs Purple Tree Period Purple Tree Top Lcap MFs Nifty 50 1 month % +7.9% +2.9% +5.3% 3 months % +14.64% +2.35% +5.01% 1 year* p.a. +41.5% +11.8% +10.25% 2 years* p.a. +47.6% +16.7% +14.5% Inception* p.a. +36.9% +16.2% +11%

Overcoming the drawbacks of Mutual Fund investments:

• 3. Advanced Investment Strategy & Technology
• Mutual Funds use plain Fundamental Analysis to arrive at their investment ideas.
• Purple Tree uses latest investment technologies like Machine Learning Algorithms incorporating more than 140

Factors (Financial & Quantitative) along with Visualization tools and Statistics for its decision making.

PURPLE TREE INVESTMENT MANAGEMENT

PURPLE TREE INVESTMENT MANAGEMENT Overcoming the drawbacks of Mutual Fund investments:

• 4. Costs

Top Large Cap Mutual Funds/Traditional PMS

• Charge anywhere between 2% - 3% of corpus every year

regardless of profit or loss or % returns.

• It comes to around 20% of profits generated on an

average basis since last 6 years {[(2.5% expense ratio) + (1% exit load)] /16.2% in last 6 years} which is expensive for such mediocre risk adjusted returns. Purple Tree

• Purple Tree charges zero management fees and zero exit
• load. Further, for benefit of investors, performance fees

is subject to high watermark levels.

• Performance Fee structure (Quarterly)

Returns per quarter Performance Fees <=2.50% 0% >2.50 & <5.0% 10% >=5.0% 20% 5 10 15 20 25 30 5 10 15 20 25 30 35 40 45

Fees Returns

Cost-Benefit Analysis

Purple Tree PMS Mutual Fund

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Market Strategy Overview:

Market Prediction & designing Option Strategies

Research Process at Purple Tree

Feature Engineering Using Statistics and Mathematics. Build High Accuracy Machine Learning Models Risk & Trade Management

Feature Engineering: More than 140 features are extracted from the raw financial dataset using different statistical tests, where p-value is lesser than 0.2 for most of the features. While creating the features, it is kept in mind what is the outcome desired from the predictive model and accordingly features are created and selected. Feature Engineering alone takes up more than 2500 lines of code. Machine Learning Models: Post feature engineering, machine learning models are selected based on the type of prediction and dataset. At Purple Tree, 7+ Supervised Classification Machine Learning Models are predominantly used for the type of prediction carried out by us. The machine learning models are trained on large historical financial dataset along with all its features to identify patterns.

PURPLE TREE INVESTMENT MANAGEMENT

Market Strategy Overview:

The Nifty 50 graph shown consists of Long and Short signals denoted by ‘Blue’ and ‘Red’ spikes respectively. The p-value is 0.11 for this proprietary signal since 2003 resulting in accuracy score of 89% and is used as one of the features in the Model.

PURPLE TREE INVESTMENT MANAGEMENT

Market Strategy Overview:

Market Prediction & designing Option Strategies: Next step involves creating a Meta Model, ensemble of all the models discussed above by a method called Stacking. Below figure shows the number of Long or Short monthly trades correctly and incorrectly predicted by the Meta-Model respectively from January, 2013 to July, 2018 with an overall accuracy score of 85.07%.

10 20 30 40 50 60

Long Short

44 13 8 2

Total Trades Long/Short

Accuracy Matrix of the Meta Model

Correct Incorrect

PURPLE TREE INVESTMENT MANAGEMENT

Market Strategy Overview:

Purple Tree’s Index Options positions are typically net –

• Theta Positive,
• Gamma Negative,
• Delta Positive and
• Vega Negative.

Risk & Trade Management:

Draws on Purple Tree’s deep expertise in risk management:

• Multi-faceted approach to risk, assessing a wide range of factors
• Navigated a number of major crises
• Shorter and shallower drawdowns than those experienced by equities

Purple Tree invests only in NIFTY 50 and BANKNIFTY index Options as these indices offer natural hedging to unsystematic risk through diversification which they offer. NIFTY 50 index: The Index tracks the behaviour of a portfolio of blue chip companies, the largest and most liquid Indian securities. It includes 50 of the approximately 1600 companies listed on the NSE, captures approximately 65% of its float-adjusted market capitalization and is a true reflection

• f the Indian stock market.

BANKNIFTY index: The BANKNIFTY index represents the 12 most liquid and large capitalised stocks from the banking sector which trade on the National Stock Exchange (NSE).

PURPLE TREE INVESTMENT MANAGEMENT

2000 4000 6000 8000 10000 12000 14000

Market spending 66% of time in correction/sideways movement

Indicates correction and sideways price movement

PURPLE TREE INVESTMENT MANAGEMENT

Ending Notes:

• Indian markets have spent about 15 years out of 23 years (66% of time)

in a correction or sideways movement throughout its history which is in tandem to US Index - Dow Jones’ 22 years out of 32 years (69% of time).

• Therefore and in addition to the factors highlighted earlier, Mutual

Funds & traditional PMS fund has and will give zero to negative returns 2/3rd of the times leaving investors without any consistent cashflows and slew of uncertainties.

• Purple Tree’s Index Options Program is designed to recognise and

convert such patterns into opportunities with intelligent investment systems that evolve as financial markets change through time resulting in consistent & higher quarterly returns through all the phases of market – bullish, bearish & sideways. Contact us: Jigar Shah, Mob: +918356997115 Email: info@purpletree.in Website: www.purpletree.in

PURPLE TREE INVESTMENT MANAGEMENT

Address: 1, Rajgor Chambers,1st floor, 99, Masjid Siding Road, Masjid(E), Mumbai-400 009. Tel: +918356997115 Email: info@purpletree.in Website: www.purpletree.in BSE Code: AP0101790175802 NSE Code: AP1493097131 Disclaimer: Any investments made in securities are subject to market risk and there is no assurance or guarantee that the objective of the investment

will be achieved. The Portfolio Manager is neither responsible or liable for any losses resulting from the client availing the Portfolio Manager’s Products.