For somebody who used to spend the entire month of May playing cricket, Bertie is sheepish to admit that the Mumbai heat now gets to him. His colleague who tracks public holidays like a hawk informed him that after Labour Day, there was no public holiday till Independence Day in August. This and the muggy weather convinced Bertie that a quick dash to a cooler clime was justified. He fired up his favourite AI tool to search for places within a six-hour radius and an assured temperature of less than 30 degrees Celsius. In consultation with the missus, he zeroed in on Ooty: a place he hadn’t visited in over 30 years and the only memory he had of it was a faded photograph of him astride a pony.
Ooty lived up to its weather promise and then some. Unlike the hill stations up north, Bertie was pleasantly surprised that the place was not choc-a-bloc with tourists despite the Labour Day holiday. Also, the tourists there were largely the family crowd. Unlike Goa, the food prices at restaurants were not exorbitant and the cab drivers were polite not just to passengers but also each other. Now, Bertie may be on vacation, but his curious mind never takes a break. When he sees something with sound fundamentals trading cheap, he feels compelled to investigate.
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Over a cup of steaming hot chocolate, Bertie decided to ask the question to a friendly cafe owner. “No party scene, sir,” he said. From his tone, Bertie could not guess how the cafe owner felt about that. Upon probing, he was told about the liquor distribution policy of the state of Tamil Nadu. The state controls the wholesale and retail distribution of alcohol and even fixes prices for the liquor sold in the state. This means that most of the liquor brands that Bertie and his ilk are used to consuming are just hard to procure as the distribution network prioritizes the cheap stuff. “So the party crowd all goes to Puducherry,” said the cafe owner. This explained why there were a few shrieky children at his hotel but no hung-over revellers.
While on the way to Ooty, Bertie had to pass through a couple of police checkpoints and his driver informed him that the state government is quite strict about the consumption of illegal substances in the hill town. Now it all added up: everything that the social media-influenced partygoer wanted was hard to get here. A picture on a pony can hardly be expected to induce mimetic desire. The liquor-stocks investor Bertie is disappointed that a large market is out of bounds for the mainstream liquor makers, but the tourist Bertie is happy to have found a sober getaway from the Mumbai heat.
Low-volatility portfolio
On weekdays, Bertie starts getting fidgety by 4.45pm. As an officegoer at Bandra Kurla Complex (BKC), Bertie is painfully aware that the window for a reasonably smooth commute home shuts at 5 pm. One day last week, Bertie got engrossed in a podcast and didn’t realize that it was well past the witching hour. He swore and anxiously opened Google Maps, only to be met with a sea of red. A distance of less than 10km, he was informed, would take 65 minutes to traverse, and it was about to get worse. The last time Bertie ran a 10km race, he had clocked a better timing than that. He thought of writing a stinging opinion piece about the ineptitude of BMC, but then chose the easier option of striding across to the Fat Cats Club.
Bertie sat down in the near-empty lounge to catch up on some IPL highlights but the brute six-hitting failed to hold the attention of the Test connoisseur. He looked around and thought he saw a familiar space. An old acquaintance who used to be an investment banker at a bulge-bracket firm but now with flowing hair, linen shirt and khaki pants, looked nothing like what he remembered. Bertie walked over and tentatively asked, “Sam?” He turned around and smiled, “Bertie! How have you been?” After pleasantries, Sam invited Bertie to join him for a drink as the person he was supposed to meet was held up in, guess what, traffic.
The two gents brought each other up to speed about the intervening years. It surprised Bertie that after quitting his high-profile investment banking job over a decade ago, Sam had ventured into real estate. He arranged funding for developers via structured credit and equity. Over time, he had also become a significant investor in some of the developers and also a landlord with over a dozen properties that he had rented out. “That’s some career move Sam,” Bertie said, “ From capital markets to real estate.”
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Sam smiled. “I couldn’t take the volatility of investment banking. The feasts and the famines.” Bertie nodded; he knew that his investment banker friends would be home by 3pm or 3am depending on where the tide of money was. “But isn’t real estate volatile as well?” Asked Bertie. “It is,” said Sam, “but nowhere close to capital markets and the main reason for that is circle rates.” Bertie knew about circle rates as the floor price that the government fixed for each area, which would be used to compute stamp duty on real estate transactions. The government periodically revised the price up and Sam was saying that it effectively provided a floor to prices. “During the low ebb, transaction volume declines but prices do not crash,” said Sam. “And that’s when developers need money and you can lend at really juicy rates.” Bertie saw how Sam had balanced his portfolio to provide a steady stream of returns across the real estate cycle. “The only risk is a credit event; when a developer goes belly up. But that’s where my stock-picking skill comes into play,” Sam said, running his fingers through his flowing hair. Traffic had ebbed and as Bertie got into his car, he realised that fixed income is not the only road to a low-volatility portfolio.
Bertie is a Mumbai-based fund manager whose compliance department wishes him to cough twice before speaking and then decide not to say it after all.
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