Interview | ‘Never Be Leveraged’: Hemant Shah’s Golden Rule for New Investors

Hemant Shah, a seasoned financial expert, began his journey in finance as a young CA student at NMIMS College in 1989. Little did he know that this early learning phase would lead to a remarkable 35-year journey in the financial markets. One of the defining aspects of his career has been his long-standing partnership with Paresh Shah. Since 1989, the duo has actively invested in stock markets, leveraging their combined expertise. While Paresh Shah took on broader operational roles, Hemant Shah remained deeply focused on research, risk mitigation, and market insights—his true area of interest.

After working in the finance sector for 20 years, Hemant Shah co-founded Mansi Stocks and Shares with Paresh Shah in 2003, aiming to provide specialized wealth management solutions. Recognizing the evolving needs of investors, they later established Seven Islands PMS, a specialized portfolio management service designed to offer customized and professional fund management. Today, Seven Islands PMS is known for its unique investment philosophy, long-term approach, and commitment to transparency.

In a conversation with WealthSpark, Shah reflected on his journey and shared insights into his investment philosophy.

Q. What sets Seven Islands PMS apart from other portfolio management firms in India’s competitive investment landscape?

At Seven Islands PMS, we differentiate ourselves through a client-first approach, ensuring that our interests are directly aligned with those of our investors. Unlike traditional PMS models that charge performance fees annually, we have structured our fees innovatively; just to give a brief there is no performance fee for the first three years. Instead, we offer two options: a standard fixed fee of up to 2.5% or a 15% performance share to be charged only at the end of the third year. This means we take on the burden of volatility of the market for the first 1,000 days, because we are confident in delivering long-term results and any investment we believe needs three years to mature.

Transparency is another pillar of our philosophy. We actively engage with clients, keeping them informed about portfolio decisions, market views, and our rationale for holding cash or deploying capital. Our regular investor calls and updates ensure that clients are always aware of shifts in strategy, giving them clarity on why we take certain positions.
Ultimately, we believe investing is an art that requires patience and discipline. Our goal is not just to manage wealth but to build long-term relationships based on trust, performance, and open communication.

Q. Your investment philosophy emphasizes “Knowledge Protects, Courage Pays.” Can you elaborate on how this principle influences your decision-making?

“Knowledge Protects” signifies our dedication to comprehensive research and analysis. We employ a structured approach centered around valuation, visibility, and validation. This involves an examination of a company’s financial health, business model, and the competence of its leadership team. By engaging directly with management, visiting operational facilities, and assessing industry trends, we ensure that our investment choices are grounded in a deep understanding of the businesses we invest in. This thorough due diligence protects us and gives us the conviction needed to take meaningful positions in companies. Investment decisions are driven by fundamentals rather than market noise. We have held on to many stocks despite technical weaknesses because the fundamentals remained strong.

“Courage Pays” reflects our belief in the importance of decisive action and maintaining conviction in our investment choices, even when there is market volatility. We focus on identifying mid-cap companies with the potential to evolve into large-cap entities over years, which requires a forward-looking perspective and the ability to act against prevailing market sentiments when necessary. We believe knowledge without courage has no meaning.

Q. The Seven Islands Multicap Fund focuses on Mid- and Small-cap stocks. How do you manage risk in these often volatile segments?

Our investment strategy is built on a balanced approach—generating alpha through midcaps and smallcaps while mitigating risk with investing in large-cap growth companies. While midcaps often outpace overall economic growth, we ensure portfolio stability by investing in fundamentally strong, scalable businesses.

Our risk management framework is core philosophy: value, visibility, and validation. We invest in companies with good fundamentals, clear growth trajectories, and sound management teams. We don’t just look at valuations; we assess business visibility, competitive advantages, and long-term sustainability.

Risk management is an ongoing process, not just a reactive measure. We conduct monthly performance reviews, beyond just quarterly results, to stay ahead of market trends. We also maintain direct engagement with company management and industry touchpoints, so that we are informed about shifts in business environments. If regulatory changes, macroeconomic shifts, or external risks affect our holdings, we act swiftly—even exiting positions when necessary to reallocate capital effectively.

Additionally, we don’t believe in staying fully invested at all times. There are periods where we hold up to 30% cash, adjusting our exposure based on market conditions. For us the best hedge is cash.

Q. With over three decades in financial markets, what key market trends do you believe will shape the next decade of investing?

Over the next decade, I see several structural trends shaping the investment landscape. India’s economic expansion will continue to drive opportunities, particularly in mid- and small-cap companies that are growing faster than the broader economy. Many of today’s midcaps will emerge as the large caps of tomorrow, and the focus remains on identifying such businesses early.

Sectorally, pharma and infrastructure will be key growth areas. We are bullish on pharma companies focused on CDMO. The future lies in AI and we believe that many corporates, will improve on efficiency and margin expansion using the AI tools. We are about to witness the AI revolution in India and many businesses are going to benefit.

Q. What role does technology play in Seven Islands PMS’ investment approach and client engagement strategy?

We see technology as an enabler, not a decision-maker. While AI and automation enhance research efficiency, they cannot replace human judgment in investment decisions. Our philosophy is rooted in fundamental analysis, management interactions, and deep industry research, and we use technology and few fundamental softwares to support our process.

Our investors have access to real-time portfolio insights through digital dashboards, regular reports, and assisted performance tracking. Our team actively engages with clients through regular calls, webinars, and market updates, ensuring that they understand the rationale behind our decisions.

We use technology to refine our process, enhance efficiency, and improve client experience, but the final decision-making always rests with human expertise as of now.

Q. Given recent global macroeconomic uncertainties, how are you adjusting your portfolio allocation strategy?

We firmly believe that most opportunities arise during challenging and uncertain times. However, it’s crucial to remain realistic and avoid preempting outcomes—whether positive or negative. In these uncertain times, the key is to stick to the fundamentals. While India’s macroeconomic landscape is gradually stabilizing, we maintain a sharp focus on company and industry fundamentals. Where we find valuation comfort, we invest gradually in a staggered manner rather than deploying capital all at once, as was the case when the markets were on an upward trajectory.

Q. What advice would you give to new investors looking to build wealth through portfolio management services?

Many new investors have not witnessed a steep market correction in the past four years—until the recent downturn. Over the past few weeks, significant wealth erosion has occurred, and I believe many new investors have learned some tough lessons. The market teaches everyone in its own way, but these lessons are always personal, shaped by individual exposure and experience.

One principle remains constant: never be leveraged. Investing in value is key, as trading rarely offers a second chance to recover losses. The focus should always be on long-term investments in the right stocks. But the real question is—what are the right stocks to invest in? Identifying them comes either through experience (a long process) or by seeking guidance from a seasoned financial expert. The value of good advice is never more evident than during a market downturn or a bear phase.