In this CFA Institute India webinar, Nicholas Levitt (Founder and CEO, Entrepreneurs Investment Office and Demeter Investment Holding) and Indranil Roy Chowdhury (Head of Group Strategy & Investment, Demeter Investment Holding) provide deep insights into evaluating offshore investment opportunities. With decades of experience, the speakers unpack the complexities and potential red flags investors must consider when engaging in high-performance offshore funds.
The session focuses on identifying overstated or manipulated investment returns. Nicholas breaks down common deceptive techniques, such as distorted internal rate of return (IRR) calculations, misrepresented cost of capital assumptions, improper cost allocations, and misleading growth percentage bases.
Nicholas also raises awareness about various offshore investment scams, including fraudulent standby letters of credit, bogus bank guarantees, and secretive asset-backed lending schemes. He emphasizes that due diligence must extend beyond the investment strategy itself and delve into the underlying infrastructure. Key aspects include evaluating the technology, regulatory framework, historical financials, and management team competence.
To mitigate risks, Nicholas recommends rigorous scrutiny of offering documents, negotiating to improve the investment infrastructure, and implementing strong cash control mechanisms—like segregated managed accounts. He also stresses the value of continuous monitoring using independent third-party verification and direct access to investment data. One of the critical highlights of the webinar is the principle of “skin in the game,” urging that investment managers should co-invest meaningful capital alongside external investors.
0:00 – Welcome & Introductions
6:20 – Background of Entrepreneurs Investment Office
7:42 – Learning Outcomes from the session
9:58 – Discussion on low-performing assets
13:00 – Common Manipulation Techniques: IRR, Fees, Growth Bases
14:10 – Types of Scams: Fraudulent Bank Instruments & Lending Schemes
19:50 – Due Diligence to be done while offshore investing
21:35 – Importance of Infrastructure: Tech, Regulation, Financial Health, Teams
24:40 – Conditions to watch for (Protective Measures)
31:37 – Role of Ongoing Monitoring and Independent Validation
35:13 – Structure approach to address challenges in offshore investing (what not to do and what to do)
40:00 – Q&A Session Begins
40:48 – Benchmark for measuring performance of the specific asset classes
43:14 – How do we avoid scam risks, or how can we identify scams?
46:13 – What are the good risk management methodologies (framework)?
47:50 – General return expectations for different strategies
51:18 – Roles of regulators in monitoring investments
54:47 – How can we hedge the risk of investments linked to particular companies?
56:52 – Overall risk metrics for risk management (Manager Alignment: “Skin in the Game”)
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The Indian Association of Investment Professionals (IAIP), the India Society of CFA Institute, was established in Apr 2005 as an association of local investment professionals consisting of portfolio managers, security analysts, investment advisors and other financial professionals.
As one of the over 160 CFA Institute member societies, the IAIP connects local CFA Institute members to a global network of investment professionals. For the continuing up-gradation of knowledge and skills of members, IAIP conducts speaker events, workshops led by leading finance professionals.
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