A Rs 50 lakh investment in Karma Wealth Builder at its December 2006 launch would have grown to Rs 5.4 crore by the end of September 2026, according to the portfolio manager’s co-founders. That is nearly 10 times the original sum. The same amount in the BSE 500 TRI would have become Rs 4.2 crore, or about 7 times, over the same period.
Rushabh Sheth and Nikhil Desai of Karma Capital Advisors shared these numbers in a conversation with ETMarkets PMS Talk. They also explained how they pick stocks and manage risk.
Price paid matters more than short-term returns
The co-founders say short-term returns depend mostly on what the market is willing to pay for a business. Long-term wealth depends on how much the company’s earnings compound and what price the investor paid. The two can move apart for years, they said, and their own record shows it.
They describe themselves as Growth at Reasonable Price (GARP) investors who insist on a margin of safety. They define risk as the chance of permanent capital loss, or a loss over a three-year holding period, rather than short-term price swings.
Investor behaviour counts as much as stock selection, they added. Karma is an employee-owned boutique, and both founders have managed their own money with the firm for 20 years. That, they say, helps them stay patient when markets are not.
Assets have roughly doubled
Karma’s firm-wide assets have roughly doubled in the last five calendar years, from about US$400 million to about US$830 million. This covers its PMS, AIF and offshore mandates. The firm manages over Rs 7,100 crore across its licences.
The founders said the growth was not a straight line. They expect the domestic business, which they call still nascent, to grow much faster and more broadly from here.
They credit performance across cycles, including strong years such as 2021 and 2023, for attracting money. A wider product range built on one philosophy has also helped. Besides the flagship Allcap Karma Wealth Builder, the firm offers Lotus (mid and small cap), Magnolia (multicap with a large-cap bias), Jasmine AIF and a GIFT City Fund.
Looking for the business before the story
The firm focuses on the rate of change in a business, not just its absolute growth. The founders think of three curves. The business turns first, the stock price follows, and the market narrative catches up last.
They try to invest when a company has started improving but sentiment is still lukewarm or negative. A company whose return on equity is rising from 10% to 16% through better capital allocation, a new product line or a restructured balance sheet can be a better opportunity than one with a steady 25% RoE that is already priced for perfection, they said.
More than 80% of the firm’s research is done in-house. It relies on management meetings, site visits and conversations with competitors, suppliers and customers. Portfolios are reasonably concentrated with low churn, centred on market leaders at an inflection point.
Holding for the thesis
Karma’s average holding period is around five years. The founders say they hold a stock because of the investment thesis, not the share price. That thesis covers the earnings path, improving return ratios, management execution, capital allocation and milestones the team tracks.
In under-researched companies, a price dip is often a chance to add, they said. They usually begin with a 1-2% position and increase it as the business proves itself. Free cash flow, they noted, is the key driver of long-term value creation.
They rethink a holding when there is a structural negative shift in the business, internal or external. Even then, they usually exit gradually unless risk control demands otherwise.
Lessons from the misses
The firm says it made money in 90% of the stocks it owned over the last ten years. The founders see a successful investment as one where the thesis played out for the expected reasons. The return must also be adequate for the risk and holding period, and it must beat the opportunity cost of owning the index.
Buying early with a margin of safety keeps losses few and small, they said, and that asymmetry drives compounding.
They listed several lessons from two decades:
Management and governance matter more than the spreadsheet. Where they were wrong, it was more often on execution or governance than on the industry opportunity.
Being early is not the same as being wrong, and investors must tell a delayed thesis from a broken one.
Cyclical and commodity-linked businesses need a top-down overlay, because operating leverage cuts both ways.
Liquidity matters at the portfolio level.