Learner's Mind Conversation with Sachee Trivedi
Chief Investment Officer, founder, fundamental investor in Indian stocks, engineer by background, and a NextGen mentor
Welcome to Conversations at The Learner’s Mind, bringing to you interviews and conversations with female fund managers, investors, and entrepreneurs whom I have had the honour to know and work with throughout my investment career and at my non-profit work at 100 Women in Finance within which 100 Women in FinTech.
Research here and here found that female fund managers outperform their male counterparts, and mixed-gender teams deliver the best performance. Despite their outperformance, female managers manage about 12 to 14% of assets in the US, and only about 1.4% of US assets are managed by firms owned by women and/or people of colour according to the Knight Foundation.
With this new series, I hope to introduce the various roles of finance to the younger generation interested in a finance and investment career. Also, I share where some of the female fund management talents are around the world as finding the right person to advise/manage your money and grow your wealth is fundamental if you don’t want to do it yourself. Or, simply enjoy learning about their fascinating journey that will inspire you to join this field.
Please share this if you think a friend or a colleague would be interested.
Today, I am honoured and excited to introduce you to Sachee Trivedi, Chief Investment Officer and CEO of her investment firm and a changemaker in the Indian Fund Management community. Congratulations to her and her team for their third anniversary in June!
Sachee Trivedi is the Founder, CEO and CIO at Trident Capital Investments. Trident Capital Investments is a long-only, Indian public equities, ESG fund, fashioned along the lines of Warren Buffet’s original partnership. Sachee is bullish on India – it is the USA of 1950s to 60s with the added steroid of digitisation.
Sachee has over 17 years of experience in the Financial Services industry in New York and London. Prior to starting Trident Capital, Sachee was a Fund Manager in the Global Equities team of Columbia Threadneedle Investments. Sachee consistently generated alpha for her clients due to her ability to analyse large opportunity sets to identify quality growth compounding business models and not shy away from taking a long-term and contrarian investment point of view.
Prior to investing, Sachee was a management consultant in New York and London primarily as part of KPMG. In this role, she advised marquee clients like Goldman Sachs, American Express, Northern Rock, and Lloyds TSB amongst others. She was at the forefront of helping her clients get compliant with regulations such as Sarbanes-Oxley, MIFID and Basel. The highlight of her consulting career was advising the Royal Bank of Scotland to develop a group-wide process for reporting on stressed assets to Her Majesty’s Treasury upon the nationalisation of the bank post the financial crisis of 2008-09. Sachee started her career as a wireless communications engineer at Samsung.
Sachee has a B. Tech degree in Electrical Engineering from the Indian Institute of Technology, a Master in Science degree in Electrical Engineering from the University of Maryland and an MBA from the Columbia Business School in New York.
Sachee is a patron of classical arts in London, a foundational member of 100 Women in Finance in Luxembourg and is active in inspiring and mentoring the next generation of women in finance. She is an avid reader, a yoga enthusiast, and above all a doting mother of two children.
Connect with her at LinkedIn: https://www.linkedin.com/in/sacheetrivedi/ and visit her website: www.tridentcapitalinvest.com.
In this interview, Sachee shared her most important lessons and skills as a seasoned fund manager, her fundamentally and value-driven investment process, her views about risks, invaluable insights about setting up and running her fund and investment company, her buoyant outlook on the Indian market (you don’t normally hear), advice to younger people in finance, and projects she is most excited about.
I am grateful to her for taking the time to answer all my questions.
Enjoy our conversation!
1. What are some important events/ turning points that led you to found your own fund at Trident? What is your mission and vision with Trident?
It was obvious to me that the India opportunity is a once-in-a-lifetime opportunity and that I needed to go after it myself.
About ten years ago, I started noticing the winds of change in India – the economy was going through a period of painful reforms that had slowed GDP growth, weakened consumption, slowed job creation, and dried up private capex.
To put these reforms in perspective, think about some turning points in the US and Europe:
1992 – Treaty of Maastricht that formalised the formation of the EU, enabling the free movement of citizens, goods and services and led to the creation of a single market in Europe.
2008 – Dodd-Frank era that led to the extensive clean-up of bank balance sheets in the US after the great financial crisis.
In the late 19th century – large swathes of Americans were given access to clean water, cooking gas, and electricity, which led to positive health outcomes.
1990s – The internet took over the Western world leading to population-scale access to information enabling the creation of new business models.
India went through its version of ALL of these transformational reforms in the last ten years!
Anyone who has studied economic history would appreciate such reforms have a far-reaching and broad-based impact on an economy and that these form the foundation for an economic supercycle – a multi-decadal period of above-average economic growth. As an investor, you will probably get only a couple of such opportunities in your career.
Secondly, having worked at a large asset manager, I also knew that most large institutional investment houses would take years to wake up to this opportunity. Large investment funds have limited agility due to some structural reasons:
Large funds cannot allocate capital on conviction – They allocate within a narrow band of the leading benchmarks. For example, for the MSCI global benchmark India weights less than 2%. So large funds will probably oscillate between committing only 1 to 3% of their assets to India. That’s buying only one or two Indian stocks to ‘play’ the India theme.
Large funds cannot take a patient, long-term view – Most large investing institutions do not have an India fund as they don’t do ‘country funds’. They view India as part of EM, International or Developing World strategies. They invest based on relative macro themes such as oil prices, commodity cycles, interest rates, and valuations. They cannot afford to take a long-term, patient view of India and need to rotate in and out of the country.
Large funds do not have feet on the ground – research presence in India. If you only allocate 1 to 3% of your assets in a country there is no incentive to build out a regional presence, have native language capabilities, or engage with local brokers with deeper research coverage
Trident Capital is the bridge connecting Western capital with Indian capital markets.
2. What are some (name up to 3) of the most important lessons as an investor you have learned?
I am an engineer by qualifications. I have a graduate degree in electrical engineering from the Indian Institute of Technology (IIT) and a Master’s degree in electrical engineering from the University of Maryland. The point of this confession is not to tell your audience how I have let my engineering brethren down by crossing over to the dark side of finance! As an engineer, you become trained to think analytically. You seek your truths from numbers. You can filter out the noise, look beyond the fads, and stay away from the herd mentality.
What do the numbers tell us:
Prioritise finding opportunities for the longer term over finding opportunities with higher returns.
If you can find a business that delivers 15% earnings growth for:
5 years – you double your money
10 years – you will quadruple your money
30 years – you will make 66 times your initial investment
So, there is a disproportionate impact on your returns if you can increase the duration of earnings growth.
Accrued tax is an under-appreciated and the ONLY gift that the tax man gives you!
If you find a stock that gives you a 15% return in a year, then you sell it, and you find another stock that gives you a 15% return, and repeat it for 10 years, you will have 18% lower returns than the investor who held on to the same stock over 10 years. Over thirty years, you will make only two-thirds of the returns! You worked much harder for lower returns!
Why aren’t others doing this?
I will defer to a conversation between Amazon founder, Jeff Bezos, and my favourite investor, Warren Buffett to answer this.
Bezos: [I asked Warren] Your investment thesis is so simple, you’re the second richest guy in the world, and it’s so simple, why doesn’t everyone just copy you?
Warren: Because nobody wants to get rich slow.
3. What are your greatest lessons in building Trident? Who do you turn to for support and resources?
There are three parts of building Trident:
Operations – this is a matter of being meticulous. We have hired reputed service providers - administrators, auditors, custodians, banks, lawyers. My CFO/COO, who is based in Edenborough, has done a great job of having completed three audits and successfully meeting all regulatory demands that come our way.
Investments – this is a matter of rigour and discipline. Our investment team of three analysts, based in India, and I spend countless hours trying to analyse business and invest as per our stated investment strategy. We are proud to have completed our three-year track record.
Fundraising – fundraising is the only barrier to entry in an asset management business. Sadly, this barrier is much higher for women. Investment management is a business of trust. With 98.4% of the $83 trillion assets in the US run by white men, there is little precedence of trusting women with your money. Popular culture has contributed to portraying women as spenders of wealth rather than creators or custodians of wealth, and there are conscious and unconscious biases against women in this industry.
There is a long march to changing perceptions, building trust and establishing credentials. Mahatma Gandhi said, “Be the change you wish to see in the world”, and I am up for the challenge.
I have met many wonderful people, men and women, on this journey and I turn to them for advice, support and mentoring. One organisation that I would call out particularly is 100 Women in Finance. This volunteer-led organisation is working tirelessly across the globe to help foster trust between women fund managers and capital allocators and increase the participation of women in this industry.
4. What is the competitive edge of your investment approach to investing in India?
Our edge is our investment strategy and the psychological resilience to adhere to it. We also have the intellectual honesty and humility to know what we cannot do – We cannot time the markets.
Let me illustrate with an example.
By some industry estimates, there are c.200 million homes that need to be built in India over the next decade. This is a huge opportunity for the entire housing value chain. You can invest in real estate developers, cement players, iron and steel companies, pipes, wiring, flooring, plywood, fittings and fixtures. But all of these are one-and-done business models and are cyclical. Once a house is constructed, it doesn’t need any more cement. Then you look at what is a recurring demand – appliances, soft furnishings, furniture – these are replaced every few years, but these are highly competitive business models – so margins and returns will always be low.
We like the paint space, because the homes need to be painted every 3-7 years. You make money not just on new homes but on all the homes that have been made till now. Paints industry in India has low competition and high barriers to entry leading to high margins and high returns on capital invested.
But at the beginning of an economic cycle, it's the cyclical stocks that start rising and one is tempted to buy these. Investors tell themselves they can predict the cycle perfectly and get in and out in time.
It never works that way.
As discussed earlier, the numbers tell us that investing for the long term will result in materially higher returns. So, in the housing space, we have chosen to invest in companies with long-term recurring revenues and a high return on capital, and we will not waver from this path.
Our edge is that we trust math over market cacophony.
5. Which figure/mentor/idea has impacted you the most in your life and how?
I am a geeky, introverted person and found my solace in books. Reading books has allowed me to recruit world-class investors as my mentors; these are my work-from-home mentors if you will! People who’ve had the biggest impact on me are Warren Buffett, Charlie Munger, Phil Fisher, Peter Lynch, and Bruce Greenwald – the theme that binds them all is they champion long-term investing in compounding business models.
Outside of these investors, my mother has had a huge impact on my thinking. She has a high emotional quotient, empathy, and an amazing ability to see through people. As an investor, these skills are incredibly useful. Charlie Munger said, “Never, ever, think about something else when you should be thinking about the power of incentives.” My mother can do this quite naturally and I am constantly trying to hone this skill.
6. If you are not working in your field, what would you be doing?
I think I would be a teacher. I secretly hope to be able to teach a course on financial analysis once Trident Capital is more mature. What allures me to teaching is the symbiotic nature of the teacher-student relationship. The teacher adds value to the students by imparting their knowledge. The students allow the teacher to lead a life of continuous learning due to the questions and challenges they pose in the class.
7. What advice would you give to your younger self?
Nothing. I don’t think in these terms. I believe in investing and life, dwelling on the what-ifs is not quite productive. I think this attitude comes from the engineering part of me. Engineers work with what they have. My younger self would be happy to work with whatever advice and resources my younger self had!
8. What is your most valuable investor/ fund manager skill?
Ability to say no to opportunities that make no sense to me. I don’t do FOMO investing!
This is ultimately about risk management. Many investors wrongly believe they are in the business of predicting the future. I strongly believe investing is a business of risk management. Warren Buffett said it best when he opined “Investing is all about protecting your downside. The upside will take care of itself.”
I believe Wall Street does not get risk management. In Wall Street, risk management is an afterthought, an activity done by another department of lesser paid, less important employees or a check-in-the-box exercise. Nobody in the real world thinks about risk Wall Street analysts do. I find that astounding!
Let me illustrate with two examples:
1. A mother adds pasta to a pot of boiling water on the stove. Her three-year-old comes into the kitchen with a ball just as the doorbell rings.
What will the mother do: Carry the kid out of the kitchen, shut the kitchen door behind her and attend the door?
What would Wall Street analysts and economists do: Calculate the probability of the ball going into the pot of boiling water:
1) Collect data on the height of the child, the position of the pot, and the bounce characteristics of the ball.
2) Forecast the time the child will spend in the kitchen and the time it will take for the mother to answer the door.
3) Do a scenario analysis by changing some key parameters.
4) Recommend a different course of action for each scenario.
a. If the probability of the ball going into the pot is less than 50%, they’d recommend that the mother leave the child behind and attend the door.
b. If the probability is greater than 50% then the mother is recommended to remove the child from the kitchen.
2. A bridge needs to be designed across a river.
What will the engineers do: They will assume that traffic will be higher than peak projected values, there will be traffic jams, there will be cars careening off the bridge, motorcyclists playing Tom Cruise of Mission Impossible, people will want to jump off the bridge, climb up the bridge, lean too far out the bridge, winds will blow, lightning will strike, heavens will pour down et al. The engineers will design to eliminate/mitigate all of these risks and more.
What will Wall Street analysts and economists do: Build complex models using probabilities, forecasting, statistics, suicide rates, accident rates...you get the picture.
You get no points for guessing which approach is right – the mother’s, the engineer’s, or Wall Street’s.
We say no to businesses facing risks which can wipe out the whole business. So, we don’t invest in technology-obsolescence risk (internal combustion engine value chain), regulatory risks (digital assets), binary risks (pharma companies), risk of fraud (companies with poor corporate governance), financial risk (highly levered companies), political risk et al.
That leaves us with businesses that have a strong shot at surviving for the long term. Only then do we analyse growth, margins, returns and other parameters.
9. What are you most excited about in the future (India, trends, or others you would like to talk about)?
Well, at its root, the India story is about the opportunity to lift a billion people out of poverty, and I am excited to be contributing and benefiting from this theme.
High Growth - India is the only fast-growing large economy in the world. At c.$3.5 trillion, India is the 5th largest economy, behind the US, China, Germany, and Japan and is expected to grow real GDP at more than 6% p.a. over the foreseeable future.
Increasing Liquidity - The market is deepening and broadening rapidly. Ten years ago, there were 150 companies with more than a billion dollar market capitalisation; now there are 550 such companies. 140 unicorns are waiting on the sidelines with many more on the way given India has the third largest start-up ecosystem in the world, behind only the US and China.
Recently, the assets of domestic investors crossed those of foreign investors in India...for the first time. This is a BIG milestone for Indian capital markets, and it was made possible by only 90 million retail investors in a population of 1,400 million people!
As per a recent CNBC report, India’s stock market capitalisation is slated to grow from c.$4.5 trillion today to $40 trillion over the next two decades.
Diversification – India is the ONLY credible diversifier to the US as it is well-positioned in the face of FOUR of the world's biggest problems:
Geopolitics – India is largely insulated from geopolitical hotbeds of Russia-Ukraine, Hamas-Israel, and China-Taiwan.
Energy transition – India embraces renewable energy as it is cheaper, reduces import bills, reduces the current account deficit, and supports the currency.
AI's impact on skilled labour – this is a tailwind for India.
Ageing – India has a median age of the population at 29 years. There are some half a billion children in India!
India is where the US/Europe was in post-World War II, Japan was in the 1970s, and China was in the 1990s. As an allocator, you want to be on the right side of this wave. Charlie Munger put this succinctly, “Fish where the fish are!”
10. What is one big piece of advice to younger women in finance?
There are a lot of misconceptions when it comes to investing as a career in the minds of young women. They believe that it is a dry, mathematical, soul-less subject. Many women like to go into more creative fields such as marketing.
Fields that are perceived as creative require creative input but still have a quantifiable output. For example, in marketing, you design a creative ad; but creativity is subjective and it's very hard to control how that ad will be received by the audience and how it will translate into sales numbers. But ultimately your success will be measured by those quantifiable metrics you frankly don’t control. So, despite your best efforts your creativity can go unrewarded
In investing, on the other hand, the investing process combines quantitative and qualitative analysis of businesses and gives you a quantifiable, undisputable, numerical performance track record. You can then use all your creativity to market that track record and raise funds.
Investing involves a healthy combination of quantitative and creative skills but more importantly, the input is quantitative, and the output is creative. So, it is a meritocratic industry and one where women would thrive. When numbers do the talking for you, you don’t need to be part of the old boys’ club, you don’t need to play politics – you will bubble up despite any effort to pull you down. Sadly, we don’t see this evidence because very few women enter this field.
I read a statistic a few years ago that there are more Fund Managers by the name of Dave in London than female Fund Managers.
Far from being demotivated, I am enthused by the idea of making a big difference in the perception of women in the asset management industry, and I am confident that once women reach a critical mass in the industry, younger women will view this industry differently. Until then my advice to young women will be to trust the math!
11. What is the most important book/podcast/course you have come across?
I would highlight that I don’t know a single reputable investor who doesn’t read all the time. Warren Buffett’s family calls him a book with legs. In this business, you must read a lot, across many topics, deeply and broadly, or you risk becoming the guy with the hammer for whom every problem is a nail.
Charlie Munger expounded that “You’ve got to have models in your head, and you’ve got to array your experience – both vicarious and direct – onto this latticework of mental models.”
I read business, science, spiritual, history, and self-improvement books, and (auto)biographies. Which book I like a lot depends on how high it lifts me from my level of ignorance then!
Thank you, Sachee, for sharing your investing insights, unique voice, and life advice! I admire your discipline, devotion, and invaluable contributions to the investment community and diversity and inclusion in our industry.
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