Avendus Capital Public Market Alternate Strategies, an asset management business of Avendus Capital, plans to launch its first Category III alternative investment fund (AIF) after it gets final approval from the Securities and Exchange Board of India.

The new long/short hedge fund will be investing in Indian listed equities and equity derivatives.

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 that which employ diverse or complex trading strategies and may use leverage through investment in listed or unlisted derivatives. It includes various types of funds, including hedge funds.

Long/short strategy

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.

9-11% return

However, it will be charging management fees (0.6-1 per cent of assets under management) and performance fees (20 per cent of the balance return after the 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-CEO — Avendus Alternative Strategies Business, Avendus Capital.

The new fund offer will close on March 10. The minimum investment in the NFO is ₹5 crore and it is targeted at high networth individuals, ultra HNIs, corporate treasuries and family offices (domestic and overseas). The company expects to start the fund with a corpus of at least ₹500 crore and a portfolio of 40 stocks (mostly large-caps) when fully deployed.

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