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Markets regulator <keyword id="19901201" type="General" weightage="100" keywordseo="Sebi" source="keywords" meta.keywordsubtype="org" meta.entityname="Sebi" meta.hostid="153" meta.entityid="Sebi">SEBI</keyword> has asked the <keyword id="20677983" type="General" weightage="20" keywordseo="mutual-fund-industry" source="keywords">mutual fund industry</keyword> to proactively conduct stress tests, a key component of <keyword id="20383727" type="General" weightage="20" keywordseo="risk-management" source="keywords">risk management</keyword> for the financial sector, which will help strengthen the ecosystem, its whole-time member Ananth Narayan Gopalakrishnan said on Friday. The regulator's stress testing emphasizes the need to assess and manage liquidity risks, especially in small and midcap equity schemes. Speaking at a mutual fund event, Gopalakrishnan highlighted the importance of modelling stress scenarios not just for individual schemes or fund houses, but for the entire mutual fund ecosystem. "It is also important to model stress scenarios for the entire composite mutual fund ecosystem. I would strongly encourage the industry and <keyword id="20090036" type="General" weightage="20" keywordseo="AMFI" source="keywords" meta.keywordsubtype="org" meta.entityname="AMFI" meta.hostid="153" meta.entityid="AMFI">AMFI</keyword> to take the lead and proactively conduct objective and credible industry wide stress tests. themselves," Gopalakrishnan said. He also emphasized the need to find better ways to communicate the risks associated with different mutual fund schemes. The SEBI official mentioned that while the current risk measurement system is straightforward and has had a significant impact, it doesn't fully capture the differences in risks among various investment schemes. According to him, many schemes are just labelled as high risk, even though they have different kinds of risks. The goal is to improve this system to better reflect those differences, while keeping it simple and easy to understand. One possible approach is to consider the portfolio's volatility and liquidity from stress tests to give a clearer picture. "While ensuring simplicity and ease of understanding remains a key objective, perhaps the underlying volatility of the portfolio along with the liquidity of the portfolio from stress tests could be used to provide better colour all around," he added. This comes at a time when the holdings of mutual funds by <keyword id="20234284" type="General" weightage="20" keywordseo="domestic-institutional-investors" source="keywords">Domestic Institutional Investors</keyword> (DIIs) and individuals have risen from about 54.3% of free float of all mid cap and small cap companies, as of March 2020 to 60.6% as of March 2024. Several fund houses have proactively stopped lump sum investments in some small-cap schemes and also capped the amount that can be invested through <keyword id="20675888" type="General" weightage="20" keywordseo="systematic-investment-plan" source="keywords">Systematic Investment Plan</keyword> (SIP) into small-cap schemes. He also highlighted the potential mismatch between the demand for paper and the supply of fresh paper coming into the ecosystem. Gopalakrishnan said the industry can make more progress in streamlining operations and improving efficiency for investors. "At a time when instantaneous fund transfers have become ubiquitous in our country, perhaps we should look to improve our internal processes and the security settlement ecosystem, to ensure that funds are passed on to investors on the day of the settlement itself, rather than a day after or two days after," he added. Over the last few years, the mutual fund industry has made impressive strides, and is now playing a crucial role in channeling financial savings towards risk capital formation. This was driven by stable macros, increased formalization, robust corporate earnings, digitisation and user friendly access. Moreover, the number of mutual fund investors has grown significantly from about 2 crore as of March 2019 to nearly 4.7 crore as of June 2024, an impressive compounded annual growth rate of 18% during that period. Gopalakrishnan mentioned that several exciting initiatives are in the works, developed with input from all stakeholders. These include a proposed low-ticket SIP, further breaking down regular SIPs into smaller, more accessible units (sachetisation and tokenization), and the introduction of "mutual funds lite" regulations. These new regulations will simplify rules for passively managed funds, reducing the compliance burden and encouraging competition and innovation. Additionally, a new class of higher-risk schemes is proposed for investors with a greater capacity to handle risk.

SEBI asks mutual fund industry to proactively conduct stress test

New Delhi, Asset management companies launched 212 <keyword id="20372350" type="General" weightage="20" keywordseo="new-fund-offerings" source="keywords">new fund offerings</keyword> mobilising Rs 63,854 crore in 2023, marginally higher from previous year, on the back of significant uptrends in broader markets. In comparison, Asset Management Companies (AMCs) garnered Rs 62,187 crore through 228 New Fund Offerings (NFOs) in 2022. Further, they collected Rs 99,704 crore in 2021 and Rs 53,703 crore in 2020, according to data compiled by <keyword id="20372349" type="General" weightage="20" keywordseo="morningstar-india" source="keywords">Morningstar India</keyword>. "The trend towards the financialisation of assets in India is unmistakable. Aligned with changing consumption behaviours and a need for a higher standard of living, investors recognise the importance of long-term investing. The COVID-19 pandemic underscored the necessity for financial planning and the creation of liquid assets to address emergencies and pave the way for wealth-building," FYERS Research said in its report. It further said that "despite indices exhibiting strength, propelled by robust economic activity, steady <keyword id="19951327" type="General" weightage="20" keywordseo="gst" source="keywords">GST</keyword> collections, and confidence in government reforms and policies, anticipating a similar outperformance in 2024 may not be prudent. Valuations across various market capitalisations look elevated, advocating a cautious approach to direct equities in the short term". As per the FYERS report, the January-March period of 2023 saw the highest number of NFOs at 57. However, the peak fund mobilisation occurred in the July-September period, totalling Rs 22,049 crore. Additionally, 29 thematic or sectoral funds raised an aggregate of Rs 17,946 crore in 2023. With an increased risk appetite for equities and awareness of products and offerings, retail investors opted for higher-risk products like thematic and sectoral funds compared to other products. Usually, NFOs come during a surging market when investor sentiments are high and optimistic. The NFOs were floated to capitalise on the mood of investors and attract their investment as they were willing to invest at that time. Industry experts said that the stock market performance along with the positive investor sentiments led to higher fund mobilisation through NFOs in 2023. In the year 2023, Nifty 50 index delivered a return of 20 per cent, majorly supported by earnings growth. <keyword id="19994732" type="General" weightage="20" keywordseo="nifty-midcap" source="keywords">Nifty Midcap</keyword> and <keyword id="20118967" type="General" weightage="20" keywordseo="nifty-smallcap" source="keywords">Nifty Smallcap</keyword> indices recorded impressive returns of 47 per cent and 56 per cent, respectively. Domestic Institutional Investors (DIIs) infused a substantial Rs 1.7 lakh crore into the market and the infusion played a pivotal role in propelling Indian equities beyond the USD 4 trillion market capitalization milestone. Overall, the mutual fund industry saw a net inflow of Rs 2.74 lakh crore in 2023 as compared to an inflow of over Rs 71,000 crore in the preceding year. The huge inflow could be on the back of sustained investors' interest in equity funds, arbitrage funds, and index funds &amp; ETFs. Debt schemes experienced a net outflow of Rs 46,100 crore last year, while equity schemes saw substantial inflows of Rs 1.62 lakh crore, closely followed by hybrid category schemes at Rs 93,208 crore.

Mutual funds collects ₹63,854 cr via new fund offers in 2023

<ul><li><keyword id="16258067" type="General" weightage="20" keywordseo="Equal-weight-indices" source="Orion">Equal-weight indices</keyword> give equal weightage to all the stocks making up a benchmark. </li><li>On an equal-weight index, no stock can unduly influence the index movement and all stocks get almost the same representation – making for a fairly well-diversified portfolio. </li><li>When many of the market constituents witness strong rise in stock prices, an equal-weight index can deliver better returns than a concentrated portfolio. </li><li>In an equal-weight index, as a result of the same weightages to all stocks, the level of sector concentration also becomes reduced.</li></ul>Many retail investors would be familiar with regular index investing. This often entails investing in funds that track indices such as the Nifty 50 and the Nifty 100. The stocks that form a part of these indices are given <keyword id="16258068" type="General" weightage="20" keywordseo="weightages-based-on-free-float" source="Orion">weightages based on free float</keyword> <keyword id="118864" type="General" weightage="20" keywordseo="market-capitalisation" source="Orion">market capitalisation</keyword> – we’ll come to it in a bit. Therefore, each stock has a different weightage in the overall index. An interesting variant that has been gaining traction is equal-weight index investing. So, these are indices that accord equal weights to stocks. Here’s more on what goes into equal-weight indices and what you must understand before investing in them. How free-float and equal-weight indices vary As mentioned earlier, the regular Nifty 50 and Nifty 100 indices are based on free-float market capitalisation. Now, there are broadly two categories of shareholders in listed companies. Promoter and promoter groups, and trusts backed by them are one category. Public shareholders form the second type. So, the shares of promoters are not traded actively or are allowed only with many restrictions. The rest of the shares are free float and allowed to be traded in the markets. Now, the free float shares multiplied by the share price gives the free float market capitalisation. While constructing the index, the stocks with higher free-float market capitalisation get higher weightages than those with lower numbers. Equal-weight indices, on the other hand, do away with such restrictions based on free- float market capitalization. These indices give equal weightage to all the stocks making up a benchmark. For example, all stocks get around 2% weightage in the Nifty 50 Equal weight index. In the Nifty 100 Equal Weight index, all stocks are given a weightage of around 1%. Broad-based stock and sector representation Investing in an equal-weight index has its fair share of advantages. Here are a few of those. Truly well-diversified portfolio with same weightages: Let us take the Nifty 50 as an example. The top 10 stocks in the Nifty 50 account for nearly 58% of the portfolio. A few stocks can have a disproportionate impact on the movement of the index. In the Nifty 50 Equal Weight index, on the other hand, the top 10 stocks make up only a little over 20% of the portfolio. No stock can unduly influence the index movement and all stocks get almost the same representation, thus making for a fairly well-diversified portfolio. Chances of outperforming in broader market rallies higher: When many of the market constituents start rallying and witness strong rise in stock prices, an equal-weight index can deliver better returns than a concentrated portfolio. In the rally after the Covid-19 crash in March 2020, stocks across segments rallied. Such moves help equal-weight indices as most stocks get to participate in the rally. And in a falling market, they may cushion downsides better as weightage to individual stocks is low (just 2% in the case of Nifty 50 Equal Weight index). In effect, the movements on the upside and downside are tempered. In a narrower market rally led by very few stocks, a free-float market capitalization index may perform better. An example would be the markets in 2018-19. Lower sectoral concentration: In the equal-weight index, as a result of the same weightages to all stocks, the level of sector concentration also becomes reduced. For example, the financial services sector gets 34.56% weightage in the Nifty 100 index. But in the Nifty Equal Weight index, the financial services segment constitutes only 22.05%. Therefore, there is a better spread of exposure across sectors and a reduction in concentration in select sectors. This diffusion reduces the risks associated with the portfolio. Also, some sectors such as automobiles get better representation in the equal-weight index than the free-float one. As a natural profit-booking index: In an equal-weight index, the rebalancing of constituents happens once every six months. Therefore, even if any stock rallies heavily during a period, its weightage would be restricted to the original equal-weight index levels. This is akin to taking profits periodically in a systematic way. For a retail investor, the optimal way to invest in an equal-weight index is through an index fund that tracks and replicates, say, the Nifty 50 equal weight index. Such an offering could be a diversifier to the portfolio. To further understand product suitability, it is best to seek help from a financial advisor before investing. (The author is the Head Investment Strategy at ICICI Prudential Asset Management Company)

Equal-weight index: For diversified investments with low volatility

<ul><li><keyword id="13082034" type="UNKNOWN" weightage="60" keywordseo="gabe-plotkin" source="Orion">Gabe Plotkin</keyword>'s <keyword id="13082035" type="UNKNOWN" weightage="60" keywordseo="melvin-capital" source="Orion">Melvin Capital</keyword> is shutting down and returning money to its investors after a poor showing of performance.</li><li>Melvin Capital lost billions of dollars last year after it was caught on the wrong side of the <keyword id="11937112" type="UNKNOWN" weightage="60" keywordseo="gamestop" source="Orion">GameStop</keyword> short-squeeze.</li><li>"I now recognize that I need to step away from managing external capital," Plotkin wrote to investors.</li></ul>Gabe Plotkin's Melvin Capital <keyword id="11918410" type="UNKNOWN" weightage="60" keywordseo="hedge-fund" source="Orion">hedge fund</keyword> plans to return money to its investors and shut down later this year, <a href="https://www.bloomberg.com/news/articles/2022-05-18/gabe-plotkin-s-melvin-capital-to-wind-down-funds-after-losses">Bloomberg first reported</a> on Wednesday.The hedge fund <a href="https://www.businessinsider.com/melvin-capital-lost-53-percent-january-after-gamestop-shares-skyrocketed-2021-1?utm_medium=ingest&amp;utm_source=markets">lost billions of dollars last year after it was caught on the wrong side</a> of the GameStop short-squeeze, which saw shares soar 2,463% to a peak of $483 per share amid a frenzy by retail investors. That, combined with a few other bad bets, led to emergency funding from Steve Cohen's Point72 and Ken Griffin's Citadel last year.Both billionaire investors <a href="https://www.businessinsider.com/citadel-will-redeem-500-million-of-shares-in-melvin-capital-2021-8?utm_medium=ingest&amp;utm_source=markets">have since wound down their investment in Melvin Capital</a> as Plotkin's underperformance has lingered. The fund <a href="https://markets.businessinsider.com/news/stocks/stocks-bonds-crypto-market-crushed-nowhere-to-hide-rates-inflation-2022-5">was down 21% at the end of the first quarter</a> of 2022, according to CNBC. That's after suffering a 39% loss in 2021. "The past 17 months has been an incredibly trying time for the firm and you, our investors," <a href="https://www.businessinsider.com/gabe-plotkin-investor-letter-closing-melvin-capital-2022-5">Plotkin wrote in a letter to investors seen by Insider</a>. "I have given everything I could, but more recently that has not been enough to deliver the returns you should expect. I now recognize that I need to step away from managing external capital."The hedge fund, which managed $7.8 billion as of April, said it expects to return all of its capital to investors by late July. Melvin Capital had managed $12.5 billion at the start of last year. The decision to close the hedge fund comes just one month after <a href="https://markets.businessinsider.com/news/funds/gamestop-short-squeeze-gabe-plotkin-melvin-capital-new-short-fund-2022-4">Plotkin floated a novel idea with its investors</a> to get rid of the high water mark that Melvin would have to reach before it could begin to earn performance fees.In the hedge-fund industry, it is common practice that investors don't pay a performance fee for poor performance. If a hedge fund loses 10% for its investors in a given year, the investor wouldn't pay performance fees until the hedge fund returns to breakeven. In Melvin Capital's case, the hedge fund would have needed to deliver a more than 100% gain in performance to get back to breakeven before it could start to earn performance fees.With Melvin Capital shutting down, it needs to sell all of its holdings if it hasn't already (though it probably has). Melvin's top holdings at the end of the first quarter included <a href="https://markets.businessinsider.com/stocks/lyv-stock">Live Nation</a>, <a href="https://markets.businessinsider.com/stocks/hlt-stock">Hilton Worldwide</a>, <a href="https://markets.businessinsider.com/stocks/amzn-stock">Amazon</a>, <a href="https://markets.businessinsider.com/stocks/ddog-stock">Datadog</a>, and <a href="https://markets.businessinsider.com/stocks/bill-stock">Bill.com</a>, according to its most recent 13F filing.All of those stocks, with the exception of Hilton Worldwide, have significantly underperformed the <a href="https://markets.businessinsider.com/index/s&amp;p_500">S&amp;P 500</a> year-to-date, with Bill.com and Datadog both down more than 50% as of Thursday morning.

Melvin Capital to shut down one year after GameStop short-squeeze caused billions in losses for the hedge fund

<ul class="summary-list"><li>Canada's largest pension fund sold a stake in a New York building for $1.</li><li>Crashing office values have led investors to turn cautious on the sector. </li></ul>The Canada Pension Plan Investment Board, the biggest pension in Canada, has completed a string of recent deals at discounted prices, including a sale of its stake in a New York building for $1, <a href="https://www.bloomberg.com/news/articles/2024-02-27/office-tower-deal-for-1-reveals-anxiety-among-longtime-buyers" target="_blank" rel="noopener">Bloomberg</a> reported Tuesday.Commercial real estate concerns have escalated thanks to the pandemic's work-from-home boom and high interest rates in the wake of the Federal Reserve's inflation fight, and the gravest fears center on what some described as the office apocalypse.<a href="https://www.businessinsider.com/real-estate-outlook-office-buildings-vacancies-commerical-markets-investors-remote-2024-1">Office vacancies hit an all-time high</a> in January and remote work looks like it's here to stay, darkening the outlook for investors in the space. The Canada Pension Plan Investment Board did not immediately respond to Business Insider's request for comment.At the end of 2023, the group offloaded its 29% stake in 360 Park Avenue South for a buck, selling to one of its partners, Boston Properties, who also took on the pension's share of debt on the building, per Bloomberg. The plan at the time of purchase had been to redevelop the 20-story office building. The pension also sold a 45% stake in Santa Monica Business Park, the report said, for $38 million at the end of last year. That represents about a 75% discount to what was paid at the time of purchase in 2018. The Canada Pension Plan Investment Board operates a $436.9 billion fund, with a global real estate portfolio worth roughly $30.6 billion. According to the Bloomberg report, the pension isn't backing out entirely from the office real estate sector, but it's also limiting its holdings in the space. Concerns have risen in the past year over banks and other large firms' holdings of commercial real estate investments, with spasms of volatility hitting the regional bank sector since the collapse of Silicon Valley Bank a year ago. Most recently, <a href="https://www.businessinsider.com/nycb-regional-bank-fears-commercial-real-estate-turmoil-fears-2024-2">investors sparked a steep sell-off</a> in shares of New York Community Bank, partly over its exposure to commercial mortgage debt. Some forecasters have floated the idea of <a href="https://www.businessinsider.com/housing-market-outlook-commerical-residential-offices-resiclub-real-estate-mortgage-2024-2">office-to-residential conversions</a> as a way to mitigate the office collapse while also boosting inventory for the supply-starved housing market, but that would require financing and logistics that aren't always favorable for property owners. Goldman Sachs said it expects office vacancies to rise from 13.5% this year to 18% in the next decade. The bank's analysts wrote in a Monday note that <a href="https://www.businessinsider.com/housing-market-outlook-office-inventory-prices-pandemic-shortage-prices-goldman-2024-2">office conversions won't be the solution for the housing shortag</a>e.Meanwhile, Capital Economics forecasts that prices on office buildings could <a href="https://www.businessinsider.com/commercial-real-estate-crash-work-from-home-us-offices-outlook-2023-12">plunge 20% peak-to-tough</a>, and the sector may not recover for decades. Economists at Moody's, too, expect more pain ahead for commercial real estate."Despite the increasingly optimistic consensus on the likelihood of a macroeconomic soft landing along with positive news from the labor market, the permanence of dynamic hybrid models has effectively muted office demand, making the year of 2023 the most downbeat since the Great Financial Crisis," Moody's wrote in a recent note.

The office market is so bleak that Canada's largest pension fund sold its stake in an NYC building for $1

<ul><li><keyword id="243137" type="PERSON" weightage="60" keywordseo="David-Einhorn">David Einhorn</keyword> accused regulators of failing to protect investors.</li><li>The <keyword id="243142" type="COMPANY" weightage="60" keywordseo="Greenlight-Capital">Greenlight Capital</keyword> chief defended the <keyword id="363661" type="COMPANY" weightage="60" keywordseo="GameStop">GameStop</keyword> investor Keith Gill.</li><li><keyword id="6355315" type="UNKNOWN" weightage="60" keywordseo="elon-musk">Elon Musk</keyword> and <keyword id="229877" type="PERSON" weightage="60" keywordseo="Chamath-Palihapitiya">Chamath Palihapitiya</keyword> supercharged the GameStop <keyword id="6641971" type="UNKNOWN" weightage="60" keywordseo="Short-squeeze">short squeeze</keyword>, he said.</li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">See more stories on Insider's business page</a>.</li></ul>The elite investor David Einhorn blasted market regulators, <a href="https://markets.businessinsider.com/news/stocks/david-einhorn-chamath-palihapitiya-elon-musk-fuel-gamestop-short-squeeze-2021-4-1030310167">accused</a> Elon Musk and Chamath Palihapitiya of juicing assets, and praised the GameStop champion Keith Gill in a letter to Greenlight Capital investors this week.The Greenlight president also highlighted the "Big Short" investor Michael Burry's <a href="https://markets.businessinsider.com/currencies/news/big-short-michael-burry-deletes-twitter-profile-warning-market-bubbles-2021-4-1030275994">exit from Twitter</a> and pushed for greater scrutiny of Archegos Capital, the family office that <a href="https://www.businessinsider.com/archegos-liquidation-cost-global-banks-10-billion-jpmorgan-bill-hwang-2021-4">blew up in March</a>. Einhorn's latest letter was obtained by <a href="https://www.valuewalk.com/wp-content/uploads/2021/04/Qlet2021-01-2.pdf">ValueWalk</a>.<h2>Here are Einhorn's 11 best quotes, lightly edited and condensed for clarity:</h2>1. "The Fed wants to be ahead of the curve on the downside to protect the stock market and corporate bondholders the economy. Behind the curve is fine on the way up no matter how frothy the stock market the recovery is." - suggesting the Federal Reserve cares more about stock prices and corporate profits than the economy.2. "If we swing a little less hard, we should hit more balls." - on his decision to short fewer individual stocks after several of Greenlight's positions were hit during the <a href="https://markets.businessinsider.com/news/stocks/reddit-day-traders-wallstreetbets-gamestop-gme-rally-upending-stock-market-2021-1-1030009280">meme-stock frenzy</a>.3. "Investors discussing why they think GameStop (or any other stock) should go up or down ought to be encouraged. There is no reason to drag anyone before Congress for making a stock pick." - defending Keith Gill, who goes by <keyword id="10687869" type="UNKNOWN" weightage="60" keywordseo="roaring-kitty">Roaring Kitty</keyword> on YouTube, and <a href="https://markets.businessinsider.com/news/stocks/gamestop-stock-guru-roaring-kitty-keith-gill-q1-portfolio-gain-2021-4-1030268270">his "great call" on GameStop</a>.4. "The real jet fuel on the GameStop squeeze came from Chamath Palihapitiya and Elon Musk, whose appearances on TV and Twitter, respectively, at a critical moment further destabilized the situation." - Einhorn suggested Palihapitiya had intentionally disrupted Robinhood because it competes with one of his investments, SoFi.5. "If regulators wanted Elon Musk to stop manipulating stocks, they should have done so with more than a light slap on the wrist when they accused him of manipulating Tesla's shares in 2018. The laws don't apply to him and he can do whatever he wants."6. "Quasi-anarchy appears to rule in <keyword id="31671" type="CITY" weightage="100" keywordseo="markets">markets</keyword>. Sure, Dr. Michael Burry, famed for his role in 'The Big Short,' reportedly received a <a href="https://markets.businessinsider.com/currencies/news/big-short-investor-michael-burry-stop-tweets-sec-regulators-visit-2021-3-1030222890">visit from the SEC</a> after <a href="https://markets.businessinsider.com/currencies/news/big-short-michael-burry-tweets-tesla-robinhood-bitcoin-gamestop-bubble-2021-3-1030156694">tweeting warnings</a> about recent market trends - and decided to stop publicly speaking truth to power. But for the most part, there is no cop on the beat." - complaining that regulators have been defanged and that corporate executives can break the rules with impunity.7. "Hometown International, which owns a single deli in rural New Jersey ... reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/treasurer and a director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing." - underscoring the number of questionable companies that regulators are overlooking.8. "From a traditional perspective, the market is fractured and possibly in the process of breaking completely." - highlighting a dangerous lack of regulation and the risk of casual investors getting scammed.9. "It was as if Bernie Madoff had been told to pay a small fine and stop ripping off New Yorkers, but to go ahead and have fun with the Palm Beach crowd." - criticizing regulators for slapping the <a href="https://markets.businessinsider.com/currencies/news/bitcoin-price-rises-as-bitfinex-and-tether-face-new-york-fraud-lawsuit-2019-4-1028142274">Tether crypto exchange</a> with only a $19 million penalty and a New York ban.10. "If Congress wants to understand why GameStop stock did what it did, or more recently how the <a href="https://markets.businessinsider.com/news/stocks/who-is-bill-hwang-archegos-tiger-cub-christian-insider-trading-2021-3-1030255723">'Arch-Egos' fund</a> cornered the market in a handful of stocks, it would be better to call to account the absentee regulators and their philosophical backers."11. "'Arch-Egos' was able to buy up most of the float of GSX Techedu, causing the stock to soar 400% in the face of unrefuted allegations of massive fraud. The SEC has an ongoing investigation of GSX but appears to not have noticed a single fund (or a small group of funds) essentially cornering the market. A traditionalist could say this was market manipulation and transparently illegal."

David Einhorn calls out Elon Musk and Chamath Palihapitiya, defends GameStop champion Roaring Kitty, and blasts market regulators in a new letter. Here are the 11 best quotes.

<ul class="summary-list"><li>When <keyword id="2976747" type="PERSON" weightage="60" keywordseo="Arjun-Sethi">Arjun Sethi</keyword> was a founder, he thought the VC pitching process was wildly subjective and biased.</li><li>So he cofounded <keyword id="9200827" type="UNKNOWN" weightage="60" keywordseo="tribe-capital">Tribe Capital</keyword> in 2018, which invests based on sophisticated data modeling.</li></ul>Founder pitch meetings have a lot in common with dating. Founders tell their life stories, their adversity, why their company means something, and investors want to be swept off their feet.If it goes well, they take a leap of faith and commit."That sounds crazy to me," said Arjun Sethi, a cofounder and partner at Tribe Capital. "But that is how some people make investments."In fact, it's how most VCs make investments, especially at the early stages. Renowned seed VCs espouse the virtue of trusting their gut and picking founders they love, even if the product is still just <a href="https://www.businessinsider.com/searchable-database-of-business-insider-pitch-decks-2020-7">an idea in a pitch deck</a>.Founders Fund's <a href="https://www.businessinsider.com/keith-rabois-founders-fund-airbnb-doordash-palantir-unicorn-interview-2020-11">Keith Rabois</a> said he's a "founder-driven investor," instead of being "technology-driven" or "market based." Famed VC <a href="https://stripe.com/blog/marc-andreessen-ama">Marc Andreessen</a> wrote that, when a startup is new, "the decision is driven almost entirely by the people."<a href="https://www.businessinsider.com/tribe-capital-new-vc-firm-from-social-capital-partners-2018-7">Sethi's Tribe Capital</a> - cofounded with fellow <keyword id="1518186" type="PERSON" weightage="60" keywordseo="social-capital">Social Capital</keyword> alums Jonathan Hsu, Ted Maidenberg, and Jake Ellowitz - rejects that notion entirely. Sethi said that when a founder pitches them, he simply tells them, "Give us access to your raw data, and we'll do the work from there."For every founder it meets, Tribe Capital analyzes the startup's data by comparing them to the thousands of data sets it's collected over the past decade or so. The process usually takes a few days.Even if Tribe doesn't invest, every company receives a report of its strengths, weaknesses, and how it stacks up against similar companies."We want to make you special, but you only become special if you understand the nuances of what you do really well," Sethi said.It's worked so far. Tribe now has over $1 billion in assets under management, <a href="https://tribecap.co/">it said</a>. In its three years, Tribe has nabbed stakes in some of the hottest startups - such as rocket startup Relativity, enterprise software Instabase, and <a href="https://www.businessinsider.com/inside-story-of-3-billion-cartas-coronavirus-layoffs-2020-5">Carta</a>, now valued at $6.9 billion.<h2>The Seed 100 and Seed 25</h2>Sethi's been in the startup world his whole career, cofounding two tech startups. After his companies were acquired, he spent time at Yahoo, before becoming a partner at Chamath Palihapitiya's Social Capital.Around 2011, he began floating the idea of building a data-based model for investing. He said he'll never forget the time he told a "well known" investor his plan. The VC told him that the idea was "stupid."The investor said that if the model actually worked, it was going to be copied and then become "commoditized." He advised Sethi to stick to age-old VC wisdom: "Figure out how to deploy as much capital as possible into the people that you like," Sethi recalled.Sethi didn't listen, going on to cofound Tribe Capital in 2018.Lately, Tribe Capital has taken data modeling further than sourcing investments. Sethi's also using it to find and build out a network of partnerships, identifying other investors Tribe wants to work with.To create a researched list of top seed investors, the team spent about six months poring over Crunchbase and PitchBook data."It was imperative to us to base the effort on ground truth and not gut impressions around who we felt were good or bad investors," Sethi said.Eventually, the team <a href="https://www.businessinsider.com/how-tribe-capital-built-the-seed-100-and-seed-25-2021-4">developed 25 areas</a> to measure an investor's performance, looking at factors such as how many of their portfolio companies reached growth stages and the number of exits. That research was the basis for <a href="https://www.businessinsider.com/seed-100-top-early-stage-vc-investors-2021-4">Insider's Seed 100</a> list of the top seed investors.That final list was, unsurprisingly, mostly male because some of the key measures were based on historical outcomes, and women have, for many years, been cut out of much of Silicon Valley's dealmaking. (The National <keyword id="6388493" type="UNKNOWN" weightage="60" keywordseo="venture">Venture</keyword> Capital Association's diversity report finds that only <a href="https://www2.deloitte.com/us/en/pages/audit/articles/diversity-venture-capital-human-capital-survey-dashboard.html">16% of investment partners are women</a>.)So Insider and Tribe also created a list of the <a href="https://www.businessinsider.com/seed-25-best-female-early-stage-investors-2021-4">top 25 female seed investors</a>.Sethi and the Tribe team plan to keep pushing the boundaries of the venture world.He said they're a team that disavows gut feelings in favor of hard numbers, that takes a deep look at your business and gives you quantifiable ways to grow."That's the team you get," he said. "Rather than just the capital and maybe some feel-good vibes."<h3>You can view the <a href="https://www.businessinsider.com/seed-100-top-early-stage-vc-investors-2021-4">Seed 100</a> and <a href="https://www.businessinsider.com/seed-25-best-female-early-stage-investors-2021-4">Seed 25</a> lists here.</h3>

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