WhiteOak Capital Files Draft with SEBI for Quality Equity Mutual Fund

What is the Whiteoak Capital Quality Equity Fund?

The WhiteOak Capital Quality Equity Fund is an open-ended equity scheme that follows the Quality Factor theme. The fund aims to provide long-term capital appreciation by investing predominantly in equity and equity-related instruments of companies with strong fundamentals such as high return on equity (ROE), return on capital employed (ROCE), low financial leverage, and good corporate governance.

Investment Strategy

At WhiteOak Capital AMC, the investment strategy revolves around stock selection, with a clear focus on investing in good businesses at attractive valuations. The two critical pillars of this investment philosophy are business and valuation.

• Business: A good business is well-managed, scalable, and generates superior returns on incremental capital. WhiteOak Capital seeks companies that have a sustainable competitive advantage, strong execution capabilities, and a commitment to creating long-term value with governance that aligns with minority shareholders’ interests.
• Valuation: Attractive valuation is identified when the current market price of a business is at a substantial discount to its intrinsic value, allowing for meaningful growth potential.

Key Attributes and Evaluation Factors:

• Superior Returns on Incremental Capital: Focus on industries with competitive intensity and companies with a sustainable competitive edge.
• Scalable Long-Term Opportunity: Evaluation of industry potential versus current size, with a focus on expanding market share and scope.
• Strong Execution and Governance: Preference for companies with strong execution, governance, and management that align with long-term value creation.

OpcoFinco Valuation Framework

The fund employs a proprietary valuation approach known as the OpcoFinco Framework, which bifurcates a company into two parts: Opco (capital-light operating company) and Finco (financing company owning all capital investments). By subtracting the invested capital from the enterprise valuation available publicly, the value attributed to Opco is determined. The OpcoFinco Free Cash Flow (FCF) multiple is then derived by dividing the value of Opco with the present value of excess FCF generated.

This approach is based on a thorough analysis of cash flows, mitigating distortions that can arise from traditional accounting multiples. While the OpcoFinco framework is a cornerstone of the valuation process, traditional valuation methods may also be applied when suitable.

Meet the Fund Managers

1. Ramesh Mantri (Equity Securities)
2. Trupti Agarwal (Assistant Fund Manager – Equity)
3. Dheeresh Pathak (Assistant Fund Manager – Equity)
4. Piyush Baranwal (Debt Securities)

Category of the Mutual Fund Scheme

Thematic Fund 

Asset Allocation

The fund predominantly invests in equity and equity-related instruments, with the following asset allocation:

• 80-100% in equity & equity-related instruments of companies following the Quality Factor theme.
• 0-20% in other equity-related instruments.
• 0-20% in debt securities and money market instruments.
• 0-10% in units issued by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

Risk Factors

Like any investment, the WhiteOak Capital Quality Equity Fund carries risks, particularly due to its thematic focus. Some of the key risks include:

• Market Risk: The fund’s performance is subject to market fluctuations, which can affect the value of the investments.
• Liquidity Risk: Investments in certain securities may face liquidity constraints, making it difficult to sell without affecting the price.
• Concentration Risk: The fund’s thematic nature may limit diversification, increasing exposure to specific market segments.

Elevate your savings strategy with our easy-to-use Angel One SIP Calculator. See the impact of consistent investing. Your future self will thank you. Start planning today!

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.