Portfolio Disclosure and Factsheet: What Each Gives

A portfolio disclosure and a factsheet answer different questions about one scheme. One is a dated list of holdings in a set format, so its rows can be added and checked. The other is a periodic summary in panels, so it describes the scheme and prints its headline figures. A list can be summarised. A summary can never be turned back into a list.

Both of these arrive from the same asset manager, about the same scheme, often in the same week. The overlap is exactly why readers reach for whichever one is nearest and expect it to answer whatever they walked in with. It will not. A disclosure and a factsheet are not a long version and a short version of one another; they are two different kinds of object, and a question that suits one of them will get a confident, useless answer out of the other.

Girnar Asset Management Limited, an invented asset manager, runs the Girnar Large Cap Equity Fund, an open ended equity scheme whose recorded net assets are Rs 4,200 crore against 120.00 crore units outstanding. Kalyani Bhagat manages the portfolio and Sohail Merchant heads operations. A trustee company, a custodian, a registrar and transfer agent, an auditor and a distributor all sit around the scheme, each doing one defined job.

Two conventions run through the comparison. Not one holding of the Girnar Large Cap Equity Fund is stated anywhere below: no security, no weight, no cash position, not one line item, and a cell that would need such a figure stands empty and is labelled empty. The second convention concerns the rules. What each of these two documents must contain, how often each must appear, and the shape each must take are set by the Securities and Exchange Board of India (SEBI). Requirements of that kind get revised. A statement that prints one of them today is not merely out of date the morning it changes; it is untrue. So every row of that kind stands blank with the source named inside it, to be filled from sebi.gov.in on the day the question actually matters.

What is each of these two documents, in one line?

A portfolio disclosureA scheme's holdings as they stood on one named date, put out in public. is a dated list of what one scheme held, set out in a standard shape. The standard shape is what makes the same scheme in two different periods, and two different schemes in the same period, all look alike. A factsheetThe manager's own periodic summary of one scheme, laid out in panels. is the manager's own periodic summary of one scheme, laid out in panels, each panel answering a different sort of question about the scheme as a whole.

The nature of a dated list, how it reaches a reader and what its stated date does to everything on it are covered under portfolio disclosure. The arrangement of a factsheet's panels, the order to read them in and what the performance panel means on which basis are covered under factsheet structure. One property separates the two documents, and every other difference a reader will ever meet descends from it.

One of these documents is a list and the other is a summary, and every other difference between them is a consequence of that one. A list has rows, and a row is an item with a size attached. A summary has statements, and a statement is a description somebody wrote after looking at rows the reader cannot see. A household coming back from the wholesale market shows the difference. The bill in the bag is a list: every item, every quantity, every amount, and the bottom of the bill has to match what left the purse. The sentence somebody says at the door, that it was mostly grains and a bit of oil, is a summary. Both are true. Only one of them can be added up, and only one of them tells at a glance how the trip went.

Which five tests separate a list from a summary?

Five tests, applied to both sides in the same order, and four of the five fall out of the first one. GranularityHow finely a document reports what it reports. comes first: the list names every holding and puts a size beside each. The summary shows groupingsMany holdings collapsed into a category that somebody chose. that somebody at the manager decided on, with the individual rows folded away inside them. Purpose comes second: one exists to disclose what was actually held on a stated date, the other exists to describe the scheme and print its headline figures for a stated period.

Producer is the third test. The answer is the same on both sides, and that is what surprises people. Girnar Asset Management produces both. The freedom Girnar has differs between the two. On the list side it works to a shape it did not design. On the summary side the shape is largely its own, within whatever limits apply. Most readers reach first for who wrote them, and asking that separates nothing at all.

The fourth test is cycle, and the row stands blank on both sides. Both documents appear on a schedule, and both schedules have rules behind them. A printed frequency of that kind becomes a false statement the moment the rule behind it moves, and it moves without telling anybody who copied it.

The fifth test is the one almost nobody thinks to apply, and it is the test that decides which questions each document can answer: what does it add up to? The list adds up to a total, and that total has to agree with the scheme's net assets. The agreement between the list total and the net assets is a reconciliationThe check that a list's total agrees with the scheme's own net assets., and a reconciliation is the reason a list can be trusted to be complete rather than merely representative. The summary adds up to nothing that can be checked. Its groupings were formed by somebody else's choices, and there is no independent figure sitting outside the document to test them against.

The last row of that grid does more work than it appears to. The list side carries a figure. The summary side carries an empty box that says the total cannot be formed, and that emptiness is not the drawing falling short, it is the finding. When a document is described as comprehensive, the useful question is not how long it runs; it is whether anything in it can be added up and set against a number that came from somewhere else.

What can each document settle by itself?

Take the list first. On its stated date the list settles composition, meaning simply what was there, and it settles concentrationThe share of a scheme carried by its biggest few positions., meaning what share of the whole sat in the biggest few positions. Both of those are settled computably, without taking anybody's word for it. Adding the rows and taking the largest few as a share of the total gives an answer that is arithmetic performed rather than a description accepted. Arithmetic performed rather than description accepted is the whole reason the list exists in a set format: a format that is the same everywhere is a format that can be computed across.

Now the summary. The summary settles the scheme's stated aim, its size, its value per unit, its charge, and its reported performance beside whatever yardstick the manager prints, each of those as at the as-at dateThe point in time that a document's figures were actually true of. printed on it. The load is real and useful. A reader who wants the scheme's purpose, its size, the worth of one unit and its record over a stated period is holding exactly the right document, and holding the list instead would leave them worse off.

Neither of these is the richer document in general, and a reader who has a favourite will eventually carry a question to the wrong one. Richness is not a property of a document. Richness is a property of the pairing of a document and a question. The list is enormously rich about composition and completely silent about aim, cost and return. The summary is the reverse. The moment one of them is settled on as the serious document and the other dismissed as marketing, the question actually in hand has stopped being asked.

What can neither document settle?

Four things, and the shape of the four is more instructive than the list itself. Neither document says why anything is held: a holding appears with a size, not with a reason, and a summary's commentary describes rather than justifies. Neither says what will be held next. Neither states what an investor's own transaction will be priced at. The price that applies to a purchase or a redemption turns on rules about the point at which the application and the money actually reach the scheme, and those rules are SEBI's. And neither states whether the scheme suits any particular investor.

Three of those four are about the future, and no report of any kind carries the future; the fourth is about the individual investor, and no publication has ever met one. That is the whole explanation for why these four sit outside both documents, and it is why no third document would fix it either. A document is a record of a state that has already happened, addressed to nobody in particular. Asking it what comes next is like asking last month's electricity bill what this month's will be. The bill has the meter reading. The bill does not have July.

Which reader question goes to which document?

Six real questions go to the Girnar Large Cap Equity Fund's two documents, in the order somebody actually asks them. The refusals are what make the answers worth having, so watch how many come back with nothing.

The first question is what the scheme was worth per unit at the stated date. The worth question goes to the summary, and the division is done by the reader rather than read off the document: net assets of Rs 4,200 crore divided by 120.00 crore units outstanding. In whole rupees that is Rs 42,00,00,00,000/- divided by 1,20,00,00,000 units. The answer is Rs 35.00 per unit exactly, and the division leaves no remainder at all. Run backwards as a check, Rs 35.00 across 1,20,00,00,000 units comes to Rs 42,00,00,00,000/- again. Neither direction needed any rounding, so no rounding decision had to be made here at all.

The second question is what the scheme returned for the stated year and against what. The return question also goes to the summary, and it is the one routing where the answer is worthless unless two labels travel with it. The scheme's recorded figure for the stated year is 13.4 per cent, and that is a net returnA figure worked out from values that had the charge taken out of them first, so nothing comes off it later., worked out from values that had already given the charge up. Printed beside it is the stated benchmark for the same year at 12.1 per cent, and that figure sits on a costless basisA figure that never had a charge taken out of it, since holding an index is not something anybody is billed for.. An index is a calculation rather than something anybody buys, so nobody is ever billed for holding it. The difference printed on the document is 1.3 points, and that difference subtracts a figure that has borne a charge from a figure that never could. Putting both onto one basis moves the honest reading to somewhere near three points, more than twice what the document appears to show. Levelling two bases onto one is covered under performance reporting. One year, one scheme, and this record carries no second year to set beside it.

The third question is how concentrated the scheme was at the stated date. Concentration goes to the list, and only to the list. A summary panel shows groupings, and a grouping was formed by somebody's choice about where to draw a boundary; how much sat in the largest single holding cannot be recovered from it. The fourth question is what the scheme held on a date falling between two published lists. A date between two published lists goes to neither. A list exists at its stated dates and nowhere else, and reading across from the nearest one is precisely the assumption ruled out under portfolio disclosure.

The fifth question is how much the scheme traded over the period. Neither, and the reason is worth being blunt about: no holding of this scheme is stated anywhere in the comparison, so even a document that did report trading would have no line to report it against. The sixth question is what the scheme will hold next month. Neither, and nothing published anywhere carries it. A routing that always produces an answer quietly teaches a reader that every question has a document waiting behind it. The lesson is false, and a false lesson is worse than no routing at all.

Set out as rows, the same six routings look like this, with the thing to be checked independently named in the last column. The last column is empty for exactly the three that route nowhere. An honest routing table looks exactly like that.

Why can a summary never be turned back into a list?

Because grouping throws information away, and no amount of care at the reading end puts it back. When four rows are folded into one grouping, what survives is the grouping. Which rows went in, and how much of each, is gone from the document. An hour spent looking at that grouping will not recover it, not because the manager hid anything but because the operation itself does not keep a record of its own inputs.

The other direction works every time. Given the full list, somebody can build any summary at all: group it by whatever categories are named, total each group, print the panel. The list contains the summary. Summarising is a one way operationSomething that can be done and can never be undone., and the direction it runs in is the whole reason the two documents are not substitutes for each other.

Household version. A shopping bill goes into the bag and somebody writes in the diary that Tuesday cost about eleven hundred rupees on groceries. From the bill, that diary line can be produced in a moment. From the diary line, nobody in the house can ever again say what the rice cost, or whether it was the oil or the pulses that made the trip expensive. The diary is not a worse document than the bill. The diary is a different document, and it was made by destroying something.

The practical consequence for anybody short of time is direct. Where exactly one of the two is kept for a date that genuinely matters, it should be the list. The summary can always be regenerated from it. The other direction is never available, and the day the composition is needed and only the panel is at hand is the day that becomes clear.

What do the two cards look like with the rule rows left empty?

Here are both documents drawn as cards, side by side, with two kinds of row on each. What a list is and what a summary is do not change when a requirement changes, so the structural rows are filled in. The rows that describe a requirement are drawn empty, with the source printed inside them.

A reader trusts a filled row and has no way of knowing when it stopped being true. A card with those rows completed from somebody's recollection is therefore worse than a blank one. A form printed with the rule rows empty, filled from the source on the day the answer is needed, never goes stale.

Girnar Asset Management Limited, the Girnar Large Cap Equity Fund, Kalyani Bhagat and Sohail Merchant are invented.
Educational material. Not advice on any investment, tax, budget or market position.