Smallcase is a platform where SEBI registered investment advisors list their portfolios. These portfolios are called as smallcases on Smallcase platform. There are 100s of smallcases listed currently, and the investors can choose the smallcase of their preference based on returns, risk, subscription fee, portfolio manager track record, brand identity, etc.
As there are 100s of smallcases available, it tends to be a really difficult task to choose a particular smallcase to invest in. Hence, we thought of giving our two cents about what are the best smallcases to invest in 2022.
To provide brief context, 2022 has been tough for markets after a golden run from 2020 May to 2021 October. Markets have rallied, and almost doubled investors’ wealth in those 1.5 years. However, over the last year markets have remained flat. In 2022, Nifty 50 has given 2% returns compared to 22% returns in 2021.
As the last two years witnessed bull and bear markets, we have considered the performance of both these markets while judging the best smallcases to invest.
Gulaq Gear 6 – The flagship portfolio of Estee advisors stands at the top after considering various factors related to performance, cost, and risk. Estee Advisors, founded in 2008, is a pioneer in quant investing in India. The firm employs 120+ quant professionals across premier institutions in India to build solid quant-based investment models.
Gulaq is a brainchild of Estee Advisors. The research team considers 130+ factors including technical, fundamental, and macro-economic while curating Gulaq portfolios. The following example shows how solid the algorithms are.
The above graph is related to persistent systems share price from 2019 to 2022. We can see the rally starting from 2020 July and the peak is reached at 2022 Jan and 2022 May. The algorithm took cues from the 130+ factors it considered and entered at a perfect entry point. Gulaq rebalances its portfolio monthly. However, the portfolio continuously held to Persistent systems till it reached the peak despite 22 rebalancing updates.
This example speaks tons about the performance of their quant models. We had observed similar phenomena across multiple stocks. If they are able to time the entry and exit points with such precision, Gulaq portfolios should have outperformed the benchmark – Nifty 50 by a significant margin. Let’s examine that case as well.
Recent bull markets have lasted from May 2020 to October 2021. The below graph shows the performance comparison of Gulaq Gear 6 returns and Nifty Multi Cap. In spite of Nifty outstanding performance of 104.8% returns in 1.5 years, Gulaq Gear 6 outperformed the benchmark by almost 60% with a total return of 162.4%. This concludes the Gulaq Gear 6 supremacy over bull markets.
We know that the factors which perform well in bull markets do not necessarily perform well in bear markets. Hence, to judge the best smallcases to invest in, we need to consider the performance in bear markets.
The following graph shows the performance comparison in bear markets which lasted from October 2021 to June 2022. Nifty MultiCap burned 14% of the investors’ wealth with returns of -14.16%. Investors ran away from the markets during these bear markets. However, Gulaq Gear 6 safeguarded the portfolio from downside risk with -1.24% returns.
What happened after the end of bear markets is equally interesting while judging the performance of a specific smallcase. Nifty 50 has bounced back with 13% returns over a 6 months period. Gulaq Gear 6, despite now being down, returned 27% to its investors.
Investment coin has two sides: Returns and Risk
Let’s consider how good Gulaq Gear 6 smallcase is when it comes to handling risk. Sharpe ratio, risk adjusted returns, is considered as one of the key metrics to judge a portfolio on risk adjusted performance.
Gulaq Gear 6 has a Sharpe ratio of 2.65 compared to Nifty Multi Cap’s Sharpe ratio of 1.16. Essentially, Gulaq Gear 6 gave more than double the risk adjusted returns compared to its benchmark index.
After considering the returns across three major scenarios and risk adjusted returns, we can confidently say that Gulaq Gear 6 is the best smallcase to invest in.
The cherry on top is the subscription fee of Gulaq portfolios. Compared to its competitors, Gulaq portfolios are much more affordable with its average monthly subscription fee costing only Rs. 300 approximately.
Estee Advisors is offering a total 6 smallcases catering to different risk categories. Gulaq Gear 6 is having 100% equity allocation. Gulaq Gear 5 has 80% Equity and 20% Debt allocations. Similar pattern is followed till Gulaq Emergency fund which belongs to Gear 2 category with 20% allocation to Equity and 80% to Debt.
Investors with aggressive risk appetite go for Gulaq Gear 6 and Gulaq wealth. Conservative investors go for Gulaq Gear 3, whereas the Gulaq Emergency Fund smallcase is used to save some funds for emergency purposes.
We have considered bull markets, bear markets, recovery ability, risk adjusted returns, team strength, flexibility to serve different investors, and subscription fees. And, We believe Gulaq Gear 6 stands on the top as the best smallcase to invest in.