Avendus Capital Public Market Alternate Strategies, the asset management business of Avendus Capital, plans to launch its first category III alternative investment fund after it gets final approval from the Securities and Exchange Board of India (in principle approval received).
The new long/short fund (hedge fund) will be investing in Indian listed equities and equity derivatives (mostly futures). It aims to generate a gross absolute return of 15-20 per cent consistently and that too with lower volatility than the overall stock market.
According to SEBI, category III AIFs are those which employ diverse or complex trading strategies and may employ leverage, including through investment in listed or unlisted derivatives.
It includes various types of funds, including hedge funds. Long/short equity is an investing (market neutral) strategy of taking long positions in stocks that are expected to appreciate (liked by the fund manager) and short positions in stocks that are expected to decline (disliked) thereby minimising market exposure.
Avendus’ long/short fund will be managed by an experienced team led by Andrew Holland and Vaibhav Sanghavi and also includes Piyush Shah and Bhautik Ambani. The fund neither has any exit load nor any lock-in period.
However, it will be charging a management fee (0.6-1 per cent as a percentage of assets under management) and performance fee (20 per cent of the balance return after hurdle rate of 10 per cent).
“Post fees and taxes, the returns will be in the range of 9-11 per cent in the hands of investors,” said Vaibhav Sanghavi, co-chief executive officer of Avendus Alternative Strategies business of Avendus Capital.
The new fund offer will be closing on March 10. The minimum investment in the NFO period is Rs 5 crore and targeted at high networth individuals, ultra HNIs, corporate treasuries and family offices domestically and also overseas.
The company expects to start the fund with a corpus of atleast Rs 500 crore and have a portfolio of 40 stocks (mostly large caps) on a fully deployed basis.