Interview With Himanshu Shah from Shah Capital in Hedge Funds Sector
In the world of investment, Shah Capital stands out for its unique approach. The firm, known for its valuation-driven bottom-up strategy, also practices a form of activism that is subtle and cooperative, often referred to as soft activism or Suggestivism.
Soft activism, a strategy that focuses on quiet, constructive engagement with company management, is a key part of Shah Capital's approach. Instead of public battles, they prefer dialogue, aiming to influence positive changes through strategic advice, corporate governance improvements, and encouragement of long-term sustainable growth.
The choice of soft activism is often made under specific circumstances. When the activist aims to preserve relationships and reputations, when the target company is receptive to engagement, when collaborative approaches are believed to be more effective, and when the goals require gradual cultural or strategic shifts, soft activism can be an effective tool.
Shah Capital manages a concentrated portfolio, a strategy they believe can create significant alpha. They are cautious with liquidity risk and base their predictions on historical insights and the analysis of individual firms and situations. They only go public with their views when they deem it necessary, and strive to be constructive and thoughtful contributors to strategy conversations.
The firm's current predictions include a trend reversal in the performance of US large cap equities due to lower interest rates and a softer global economy. On the other hand, they find better opportunities in the small-mid-cap US equity space and non-US equities. They believe that small-mid-caps and non-US equities offer tremendous opportunities, particularly with stronger balance sheets and underwhelming valuations.
Shah Capital predicts better profit growth for small-mid-caps and non-US equities in 2025, presenting a potential for strong returns. However, they also caution that profit growth disappointments are more likely in a lower interest rates regime.
The firm's sector-agnostic, fundamental approach means they follow companies for a long period before investing. They are not swayed by market trends, but rather focus on the individual merits of each company.
In summary, Shah Capital's approach to investment is characterised by its long-term, unlevered capital, valuation-driven strategy, and soft activism. Their focus on small-mid-caps and non-US equities, driven by their belief in their potential for strong returns, sets them apart in the investment landscape.
Shah Capital's investment strategy incorporates finance, business, and investing by employing a valuation-driven strategy, soft activism, and focusing on small-mid-cap and non-US equities. Instead of aggressive tactics, they utilize soft activism to engage in constructive dialogue with company management, aiming to encourage long-term sustainable growth through strategic advice, corporate governance improvements, and gradual cultural or strategic shifts.
