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Founder and CEO of RV Capital Management.
“The key thing when dealing with failures…. You basically have to say…. OK, that has happened yesterday. Today is the first day of the rest of my life.” – Ranodeb Roy
This month Markeligion had the great honor of interviewing one of the top leaders of the finance industry, Mr. Ranodeb Roy, who is the Founder and CEO of RV Capital Management. Before his dream to be an entrepreneur in 2012, he was the MD and Co-Head of the Fixed Income Division of Merrill Lynch, Asia Region, where he built his career for a decade, then he moved on to become the MD and Head of Morgan Stanley, Asia-Pacific Region, for four years. Currently, he is also a Non-Independent; Non-Executive Director of Bandhan Bank. He is the alumni of top Indian institutions like IIT Kanpur, where he received his B. Tech graduation in Computer Sciences, and IIM Ahmedabad, where he pursued his PGDM.
Mr. Roy, how will you describe your journey through these top Indian academic institutions?
To put it simply, my student years - four years in IIT, and the two years in IIM were, were like most other students. They were the best years of my life. You grow a lot as a person as you spend a lot of time away from home. I made lifelong friends. My main takeaway from those institutes was that there were a lot of really good people out there who are academically oriented. But to survive and succeed, one has to be extremely disciplined. One should always stick to what they know best and stick to their strengths because not everybody can do everything. You will always find a person who is better than you. But one should never doubt themselves as everybody is good at something.
Do you still dedicate time to upgrade yourself in the present context, where the business world seems to change very much, very fast?
As I am in a business, which is very volatile. So, I have to continuously read and know about what's going on. Every day, every month, every quarter, something new is happening in the world market. So, essentially you have to read a lot to stay up-to-date on what's happening. I read books as well. Normally I like to read 2-3 books at the same time. One fiction, one non-fiction, and one market-related. I normally read those books while going to work, or when I am coming back, or a little bit before going to bed. Like something completely new. Maybe the history of art, the geography of Israel. But I'll be honest. Last three months, I wasn't able to do any of this, given what's going on in terms of the Covid-19 situation. My work has increased dramatically and now that I am working from home, I'm working even longer, because your commute to your work is 15 seconds.
So, apart from your work, how do you spend your time? What are your interest areas?
So, we have a group of friends who discuss matters that are important to us and world society. Today morning in our group, we had a discussion on "Which form of governance is best to solve the coronavirus crisis?” We have other discussions like "Are Men in important positions or are women in important positions, better suited to solve this.” I am also heavily involved in some social activities. As you know I play a role in Bandhan Bank, which is a highly social-centric organization that is trying to lift society to the next level. I am currently working with an NGO to uplift rural art into the mainstream. Preservation and promotion of rural art are essential, else those will go extinct and it will be a huge loss for future generations. Of course, my family and friends keep me busy. In my free time, I watch a lot of Netflix as well. My wife and I love to watch a lot of crime thrillers. At the moment we are re-watching Narcos.
Is there any book that you will vouch for? What is the one book you always go back to and suggest to someone?
Oh Wow! That's a difficult question. So, I like books about history. Of the many books that I have read in the last ten years, I really liked Ramchandra Guha's ‘India After Gandhi’. This book essentially tells you the history of India after the 1950s, and what I appreciate the most about this book is that it's not judgemental at all. It doesn't say so and so was good or bad. So, topics like why did Indira Gandhi do nationalization of the banks or why did she do an emergency, without judging and labeling that if it was a good decision or a bad decision, it tells you objectively what caused those things to happen. I think about what those policies and decisions had done for India in the next 10, 20, 30 years, and I think if they didn’t happen, potentially India could have been an economically backward country now. Similarly, the book describes the Vajpayee era and others... It's a thick book. But it's a very interesting read.
Can you name some turning points in your academic and corporate life? How did they affect you in your journey?
Well, one of the biggest turning points of my life was when I joined IIT and met with my peer group. It was fantastic and eye-opening. My roommate then was all India 3rd, and now he is the Finance Secretary for the Government of Madhya Pradesh.
In my work life, there have been many turning points. I have lived and worked in five different countries. In my corporate life, I have faced many scenarios where there I knew I could approach it the easy way, or I could try it the hard way. I have always chosen the more difficult path. In my mind, I feel that it will be much more interesting and exciting to do something in a way that I know nothing about. There have been 3 or 4 such situations where these choices have come to play. My move from Hong Kong to Tokyo was one. I was getting a bigger job in Hong Kong but a smaller job in Tokyo. I took the job in Tokyo, and it became a bigger job in a year. But the most important turning point for me was to set up RV Capital. Again, I had downsized my life from something big, where I was running a larger firm of 500 people, to setting up our own firm with only 5 people. It has been a really tough but interesting journey
Mr. Roy how you do to keep your spirits high when you facing roadblocks in your journey?
Oh! That is very important because you know I trade in the market. So, the chances of having your highs and lows are very, very high, right? Basically, how I look at it is, "This has happened. This is in the past. I have to look forward to." So, being able to cut off from what has happened in the past and not think about it at all in the future is the best way to deal with tough situations. I always ask myself, what is the worst thing that is going to happen even if this situation continues? If the worst thing that can happen is that I have to give up everything and go back home to Kolkata and live... It's not the end of the world. Right? You basically have to say, OK. That has happened yesterday. Today is the first day of the rest of my life.
How did RV Capital start and how has its growth been? Was it more or less than what you had expected when you founded your company?
RV Capital is an Asset Management Company. Currently, we have only one product, which is like a Hedge Fund, that buys and sells various Asian Securities to be able to generate money for the investors. It tries to make money in all market circumstances, up and down. We have grown from 5 employees’ firm to roughly 27 employees’ firm. And hopefully, we will be able to continue our success.
Mr. Roy, RV Capital Management is a Hedge Fund Management Company. Can we get an overview of Hedge Fund Management generally speaking?
A hedge fund is a fund that is like a mutual fund. But it can go for both long and short markets. So, as a result, on an absolute basis, when the market is going up a lot, it doesn't make that much money. But when the market is going down a lot, it doesn't lose that much money. So, what we basically do is find trades that we think will do well in some markets and will also do well in some other markets. So, Hedge Funds are constantly looking at buying longs that they like, and instituting shorts they don't like. So, the portfolio is overall hedged. But of course, you have to beat the index over a long period, otherwise, people won't give you money. Hopefully, the longs and shorts net each other a little bit but they should all make some money in a similar direction. It is considered much more difficult than what a mutual fund does, because, mutual funds have a mandate to ONLY go long.
Investment, in my opinion, is the product of 3 aspects. One is asset allocation, deciding what assets to allocate in, the second is about choosing the right securities, and the third is about market timings. We allocate assets mainly on fixed income products, some commodities, and some foreign exchange. So, that's our universe. Securities, we decide, which one to go long and which one to go short.
In general, it’s good to be a contrarian. When everybody is buying, don't do anything, don't buy. When everybody is selling, buy, and when everybody is buying a lot, sell. That's essentially what we do.
Mr. Roy, what skills do you normally look for when you recruit employees for your company?
Firstly, ours is a niche business. Fixed income, hedge fund, etc. So, by definition, on the investment team, we look for people who have a long experience in this industry. However, at the junior level, we hire candidates who we think will develop those same skills over time and guidance. We also look at the candidate's IQ and EQ. In today's world, programming skills are also quite important. Then there are marketers. We have a few of them. But they need to have the ability to market, communicate, and logically organize client meetings and discussions. Then there is the operation and risk team. They need to be organized, systematic, punctual, and have a very logical mindset. But underlining all those, everybody needs some Math and Economic skills, because that's our industry.
What are some funds that you would recommend for people who are in their 30s and 40s?
What I will say to them is that if you are not in the investment industry, then you should not waste time in selecting individual stocks and bonds. You should invest in funds. Give it to the experts. But do it systematically. A little amount every month, rather than going all-in in one shot. Make a systematic investment plan, where you allocate assets between different asset classes. Stocks, bonds, real estate, maybe even gold. If you are in the investment industry, you should do what you know best. If you are an equity investor in Indian equity, you should do only that. And if you want to asset allocate your personal money into bonds and funds, then you give it to a fund manager.
Given the situation of COVID-19 where most of the organizations are working virtually and operating from employee home location, what is RV Capital Management doing for its employees and how productive are the employees working from home?
As we are a service sector that interacts with the markets, relying on computers and other virtual platforms. So, most of our requirements are available electronically. Our industry is geared towards working from home. I sometimes spend three weeks in Kolkata to visit my family, but I run my company from there as if nothing has changed. With the availability of so many applications like Zoom, Skype, Teams, and Slack, communications are not a problem anymore. For this, I don't think there has been any big drop in productivity. Of course, face-to-face interactions are missing obviously. I normally go on the road once every two-three months, to talk to investors face to face. That I am doing through Zoom or Teams. But I don't think that I am at a disadvantage, because everybody is in the same boat. If it was just Singapore that was shut down, then we would have been at a disadvantage. Today the whole world is experiencing the same condition.
In terms of the future, these things will make businesses a lot more cost-effective. The fact that one can have so many meetings, and so easily, when previously we thought, we should meet face to face, or talk on the phone. Those things are now being forced upon us differently. Just like in E-Commerce, people are forcing themselves to move to e-commerce because now they can't go to the store. Similarly, in our industry, many of these things will become more part in the due course.
Do you foresee any changes in the Capital Management Industry post-COVID-19?
Yeah, I do see some changes coming from the perspective of deciding which things will take longer to recover. Moreover, at the moment, we have been reliant on central bank policies. Every central bank has made extremely aggressive actions to prevent a massive sell-off of securities. So, gradually we have to move away from that reliance and stand on our own feet. Even if we do well in our sphere, people tend to take money out because everybody wants cash first. Then they put them in bank deposits. After a while, they realize bank deposits are not earning enough, and then they gradually go back to investing. So, we will most probably see them cycling out, then cycling back in. So, everybody’s asking if it's going to be a V, U, W, or L shape, I think it will be an L shaped curve.
So, Mr. Roy for our final question, can I ask, what are your 3 Success Mantras for the people in reading this interview?
Well, I don't know about the success mantra, but my attitude in life is to be optimistic. As I said, this is the first day of the rest of your life. So, you should think of your life that way. Secondly, there is always an easy path and a difficult path. The difficult path will be more interesting. Thirdly I would like to say, try and get out of your comfort zone and learn as many new things as possible. But when it comes to your job, try to stick to what you do well and NOT try to do everything for everybody. So, they are my mantras, if you would like to call it that.
By Kaustav Bose, Uday Kanth.
