Tag: AIF

This alternate investment fund has given 75% return in one year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Prudent Equity Ace Fund, a Securities Exchange Board of India (SEBI) registered category III long only alternate investment fund (AIF), has delivered roughly 75% time-weighted rate of return (TWRR) in one year. The fund, which was launched last year in December, is up roughly 20% in the past quarter.

In the month of December, the AIF is 8% up, the fund house said in a statement.

According to Siddharth Oberoi, Fund Manager of Prudent Equity Ace Fund, an investment of ₹1 lakh in the fund at the time of launch in December 2022 would have translated to ₹1,75,000 as on December 2023.

About the fund

The fund comes with a minimum ticket size of ₹1 crore. It is a flexi cap fund that invests in public listed Indian equites only.

“Currently, we see value in a lot of construction, engineering and infrastructure companies. Hence, we are overweight there with ~35% allocation, followed by the banking sector. Presently the AIF handles capital of around ₹300 crore,” Oberoi told CNBC-TV18.com.

Fund’s investment strategy 

Talking about Prudent Equity Ace Fund’s strategy, Oberoi said, “We are very focused on the economics of a business. We try to figure out how a particular company differentiates its products and/or services and what it is doing that will drive its growth going forward. Management quality is also something we focus on.”

Oberoi emphasised that capital allocation ranks high in their criteria. They prefer companies with a significantly higher return on capital than the cost or those on track to achieve this soon.

“We run a sector agnostic fund. Instead of following a top-down approach we look at the economics of the business irrespective of the industry. Every industry has its own outlier present and if it is available at valuations that is appealing us, we like to invest in those pockets,” he said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi mulls prohibiting differential rights to AIF investors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Markets regulator Sebi on Wednesday proposed that AIF (alternative investment fund) investors should not be given any differential treatment, which affects the economic rights of other investors. In addition, the regulator is looking to provide clarity on the pro-rata rights of investors in an AIF scheme.

AIF is a privately pooled investment vehicle, which collects funds from investors, for investing under a defined investment policy for the benefit of its investors. In its consultation paper, Sebi suggested that no differential rights should be provided to investors of the AIF/scheme, which would affect the economic rights of other investors. However, this should not apply in case of differential rights provided on terms with respect to the hurdle rate of return, performance-linked fee/additional return and management fee.

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With respect to the pro-rata rights of investors, the regulator recommended that the rights of each investor should be maintained at pro-rata to their commitment to the scheme, in each investment of the scheme, while making an investment. Besides, the rights of each investor should be maintained at pro-rata to the investment made in the investee company, while distributing the proceeds of the investment. Further, the manager can charge a performance-linked fee as per the terms of the contribution agreement with each investor.

“While manager/sponsor may continue to have differential distribution to bear loss more than their pro-rata holding, the same is subject to the condition that the amount invested by the AIF in the investee company shall not be utilised directly or indirectly to repay any pending obligations to the manager/sponsor or their associates,” the regulator said.

Existing schemes of AIFs, which have adopted the priority distribution (PD) model, can continue with the existing investments, but should not accept any fresh commitment or make the investment in a new investee company, it added. Sebi noted that AIFs with a priority distribution model may be misused to mask true asset quality, which may lead to the ever-greening of bad/doubtful assets and therefore, it might not be prudent to permit AIFs to adopt such a model.

“It is necessary to explicitly prohibit adopting of differential distribution model by AIFs and any such practice providing differential rights to investors which affect the pooling requirement of the investment vehicle,” it said.

In November 2022, the regulator barred AIF schemes with a priority distribution model from making investments in a new investee company as the model provides for significant scope for mis-selling to investors. Sebi had said it stopped such investment till it takes a view on the same. The Securities and Exchange Board of India (Sebi) had sought comments from the public till July 4 on the proposal.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Trust Group launches alternative investment fund with monthly exit option

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Trust Group, country’s full-service financial house, has launched its second scheme under Athena Investments, a category III Alternative Investment Fund (AIF). Named as Athena Enhanced Equity Fund (EEF), this is is an open-ended long-only equity AIF. This AIF is focused on improving equity returns by using a core-satellite approach to investing, Athena Investments said in a statement.

The core portfolio will comprise of high pedigree secular growth businesses which have pristine financials and shareholder focused managements to generate consistent compounding returns. More than 70 percent of the portfolio shall be invested in large-cap companies for most periods of time, it said.

The satellite portfolio shall utilise option strategies to enhance the yield on the existing portfolio/cash investments and to tactically increase/decrease allocation to portfolio companies.

The fund has no lock-in and no exit-load with a monthly exit option for investors. The objective of this fund is to generate an alpha of ~3 percent over the long only equity portfolio, the fund house said.

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The investment universe of EEF is the top 200 listed companies by market-capitalization. A filtration process will be followed to identify the best ideas to invest. Portfolio weights and positions will be actively managed. Fundamental research is combined with a systematic investment approach via equity derivatives. The endeavor is to deploy proprietary derivatives strategies to generate an alpha over the long-only equity portfolio, it said.

Investors with a time horizon of greater than two years can look at investing in this scheme. The fund aims to raise capital from resident and non-resident Indians, high net worth individuals (HNIs), banks, accredited investors, corporates and trusts.

Vineet Bagri, CEO, will manage Athena Investments AIF. He was the Managing Partner of Trust Plutus Wealth (India) Pvt Ltd and has over 24 years of experience across banks, NBFCs and advisory.

On the launch, Bagri said, “The EEF is our second offering which helps clients invest into a long-term portfolio of high quality companies whilst using
proprietary strategies in the F&O space to generate an alpha. We believe that this will bring a differentiated alternative to listed equity investments and products to investors. We are planning to raise Rs 1,000 crore in the first year. This is an open-ended fund and we will be accepting subscriptions till we believe that the expected returns are not compromised due to investment velocity.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Rakesh Jhunjhunwala-backed Alchemy Capital launches new AIF: Key things to know

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Rakesh Jhunjhunwala’s Alchemy Capital Management (Alchemy) has launched a new Category III Alternative Investment Fund (AIF)—Alchemy Emerging Leaders of Tomorrow. The AIF has a tenure of 4 years and is targeting a corpus of Rs 500 crore and more, the company said in a statement.

This new fund is launched with an aim of enabling investors to capitalize on the
immense growth potential of small and midcap companies that emerge as a leader. With a portfolio of 20-25 stocks that will be sector agnostic, the fund will focus largely on small and midcap companies with minimum 65 percent allocation. The portfolio will also include investments in large caps and about 10 percent in IPO opportunities or any other instruments permitted by applicable laws, the company said.

The scheme aims to raise investments from Resident Indians, NRI, HNI, Hindu undivided Family (HUF), Banks, Bodies Corporate, Partnership Firm, Accredited Investors & Trusts, seeking long-term wealth creation with high growth prospects.

The fund’s strategy is to generate long-term capital appreciation by identifying high-quality companies with strong growth prospects benefitting from themes such as India’s rising discretionary spending, digitalization, global outsourcing, import substitution, and improving manufacturing competitiveness and investment, with a minimum investment of Rs 1 crore.

Hiren Ved, a market veteran, and Co-Founder, Director, CEO, and CIO at Alchemy Capital Management will manage Alchemy Emerging Leaders of Tomorrow together with his colleague and CoFund Manager, Mythili Balakrishnan.

Commenting on the launch of this new fund, Hiren Ved, said “India is on the cusp of a solid economic recovery led by manufacturing and digital-led businesses. While investors have already played the consolidation story of backing current leaders, our endeavour for Alchemy Emerging Leaders
of Tomorrow is to bet on new entrepreneurs with much more agile and innovative business models and have a hunger for quality growth.”

Mythili Balakrishnan added, “We believe that India is entering a phase of
broad-based growth and the small and mid-cap space in India offers an opportunity to make attractive returns. Also, the small and mid-sized businesses have undergone multiple stressors over the past few years but have emerged stronger and are well placed to take advantage of the current demand environment. Our aim is to identify these businesses and stay invested in them for long-term capital appreciation.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi allows AIFs and VCFs to invest in overseas investee companies but with riders

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Sebi on Thursday came out with new guidelines for Alternative Investment Funds (AIFs) and Venture Capital Funds (VCFs) for making investment abroad, under which overseas investee firms won’t need to have an Indian connection.

Under the rules, AIFs can invest in securities of companies incorporated outside India. Besides, VCFs are allowed to make investments in off-shore venture capital undertaking, subject to certain conditions.

One of the conditions was that such overseas investments were allowed only in those companies which had an Indian connection. Like, a company has a front office overseas, while having its back office operations in India.

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“The requirement of the overseas investee company to have an Indian connection has been done away with,” the Securities and Exchange Board of India (Sebi) said in a circular.

As per the fresh guidelines, AIFs or VCFs will be allowed to invest in an overseas investee company, which is incorporated in a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s (IOSCO) Multilateral Memorandum of Understanding or a signatory to the bilateral Memorandum of Understanding with Sebi.

Besides, AIFs or VCFs will not invest in an overseas investee company, which is incorporated in a country identified by Financial Action Task Force (FATF) as a jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply.

Also, such entities have been prohibited from making an investment in a country that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with FATF to address such deficiencies. AIFs or VCFs will have to file an application before Sebi for allocation of overseas investment limit in the format.

“If an AIF/VCF liquidates investment made in an overseas investee company previously, the sale proceeds received from such liquidation, to the extent of investment made in the said overseas investee company, shall be available to all AIFs/VCFs for reinvestment,” the regulator said.

Further, AIFs or VCFs will sell the investment in overseas investee companies only to the entities eligible to make overseas investments.

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AIFs or VCFs will have to furnish the divestment details of the overseas investments to the capital markets regulator in a specified format within three working days for updating the overall limit available for overseas investment by these entities.

Also, all the overseas investments sold or divested by them till date, will also be reported to Sebi within 30 days.

AIFs are funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy, while VCF is an AIF which invests primarily in unlisted securities of startups, early-stage venture capital undertakings mainly involved in new products, new services, technology or intellectual property right based activities or a new business model.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

AIF commitments see a whopping 42% rise in FY22 with private equity, debt funds accounting for majority share

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian AIF industry continues to grow at a healthy pace with the commitments rising 42 percent to Rs 6.41 lakh crore in March 2022 compared to the same period last year, a CRISIL report released on Thursday showed.

The funds raised in financial year 2022 were Rs 3.14 lakh crore, up 36 percent from the previous year. Of the funds raised in the year, Rs 2.84 lakh crore was invested as of March 2022, the report added.

AIF or Alternative Investment Fund is a privately pooled investment fund where sophisticated investors together put in money to invest in unconventional categories such as venture capital, real estate, SME funds, among others.

Between March 2020 and March 2021, the AIF commitments had increased 22 percent to Rs 4.51 lakh crore. The funds raised increased by 23.32 percent during the period to Rs 2.3 lakh crore, of which, Rs 2 lakh crore was invested as of March 2021.

The growth has been spearheaded by Category II, which formed 81 percent of the total commitments in fiscal 2022, said CRISIL.

While Category I includes venture capital funds, Category II includes equity funds (listed and unlisted), real estate funds and debt funds and Category III includes long-only equity funds and long-short equity funds.

However, Gopal Srinivasan, Founder, TVS Capital Funds, said that the Indian AIF industry was still in the nascent stage and that there was a need to scale it up by at least 5-10 times to Rs 20-25 lakh crore as “we’ve only just begun”. It should be made easier for investors by democratizing access for them to be able to just “click and pick” as is the case now with digital payments that have come far.

“When the capital is here, why should we export our profits,” he added.

Sub-category-level benchmarks

CRISIL Research on Thursday launched sub-category-level benchmarks for for the domestic AIF industry to help decision making by stakeholders. The benchmarks, which are in accordance with SEBI’s guidelines, were developed after consultation with industry participants.

“The sub-category level benchmarks will be useful to all stakeholders — investors, intermediaries, and AIFs alike — as they provide a 360-degree view of the performance of a particular sub-category,” said Piyush Gupta, Director, CRISIL Research.

The sub-category benchmarks come after the category (I, II, III) level benchmarks were introduced in 2020. The sub-category-level benchmarks would allow comparison of AIFs in seven sub-categories under I, II and III broad categories which include listed or unlisted debt, equity, real estate funds and others.

The deals in the private equity market have risen sharply in 2021.

*Note: The line graph represents value of deals (in $bn) and the bar graph represents number of deals

The benchmarking will help investors select the most suitable fund based on their objectives, allow intermediaries to focus on the most accurate funds for their clients and a comparison for AIFs’ performances.

“With investors embracing the product and the industry maturing, there is a need for enhanced benchmarking practices,” said Jiju Vidyadharan, Senior Director, CRISIL Research, adding that the benchmarks will bridge the gap and enable “like-to-like fund comparison within its category”.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

AIFs: Sebi streamlines approval process for sponsor changes requiring NCLT nod

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Markets regulator Sebi has streamlined the process for approval with respect to change in control of sponsor and manager of Alternative Investment Funds (AIFs) involving a scheme of arrangement under the companies law.

In a circular on Wednesday, the watchdog said such applications seeking approval for the proposed change in control of the Sponsor and/or Manager of the AIF can be filed with Sebi prior to filing the applications with the National Company Law Tribunal (NCLT).

“Upon being satisfied with compliance of the applicable regulatory requirements, in-principle approval will be granted by Sebi,” it said. According to the regulator, the validity of such in-principle approval would be three months from the date of issuance, within which the relevant application should be made to NCLT.

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The latest circular has been issued to “streamline the process of providing approval” with respect to such changes. Sebi said that within 15 days from the date of NCLT order, the applicant should submit the requisite documents, including copies of the order and approved scheme, for the final approval.

The circular would be applicable to all the applications for change in control of Sponsor and/or Manager Of the AIF for which the scheme(s) of arrangement is filed with NCLT on or after April 1, 2022.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Sebi provides clarifications on AIF norms’ amendment

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Markets regulator Sebi has come out with clarifications with respect to the latest amendment to norms governing alternative investment funds (AIFs). Through a notification issued on November 9, Sebi amended Alternative Investment Funds Regulations, 2012.

It allowed category III AIFs, including large value funds for accredited investors of category III AIFs, to calculate the concentration norm based on net asset value (NAV) of the fund for investment in listed equity of an investee company. The amendment also facilitated co-investment through the portfolio management route.

In a circular on Monday, Sebi specified that the investment limit in listed equity has to be calculated based on the NAV of the fund on the business day immediately preceding the date on which the category III AIF makes investment.

The NAV of the AIF will be the sum of value of all securities adjusted for mark to market gains/losses. This would include cash and cash equivalents but exclude any funds borrowed by the AIF.

On passive breach of concentration norm, Sebi said when the market value of the investment of category III AIF in listed equity of an investee company exceeds the prescribed investment limit, it shall be rectified within 30 days from the date of the breach. Sebi further said that appointment of custodian would be required if the sum of corpus of the AIF and the value of the co-investment managed by the manager of the AIF as co-investment portfolio manager is more than Rs 500 crore. Co-investment means investment made by a manager or sponsor or investor of category-I and -II AIFs in investee companies where such category of AIFs makes investment.

As per the amended norms, co-investment by investors of AIF shall be through a co-investment portfolio manager.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Big Deal: Experts discuss GST on fund management fee

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government has made many regulatory changes in the past couple of years to make AIF (alternative investment fund) investment more robust. The industry asks for more measures such as goods and services tax (GST) reduction on fund managers’ fees to make it more attractive. On Big Deal, Nisha Poddar discussed various suggestions with Kalpesh Jain of Multiples Alternate Asset Management, Ashish Fafadia of Blume Ventures, and Siddarth Pai of 3one4 Capital and co-chair at Regulatory Affairs Committee of IVCA.

For the entire conversation, watch the accompanying video.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IRDAI allows insurers to invest in AIF, here’s what it means according to experts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Recently, the insurance regulator IRDAI allowed the insurance companies to invest in fund of funds for domestic use. This will help create domestic pool of capital when India is currently heavily dependent on foreign funds.

“It is a victory for India, the total amount of money available with long term pools like pensions and insurances roughly in India is about 67 lakhs crore as per the recent estimates,” said Gopal Srinivasan, CMD, TVS Capital Funds and Board member, IVCA.

He added that if 5 percent of that is invested it is about Rs 3-4 lakh crore in to Alternative Investment Fund (AIF) I and II.

He further noted, “last April, the insurance regulator said that insurances can now invest into fund of funds. By opening up the insurance now to fund of funds many insurance companies will safely find gatekeepers like an NIIF, like a State Bank MSME funds hopefully many new fund of funds the government can set-up or the private sector can set-up through which they can access venture capital, access growth equity very safely.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow