IDFC Asset Management Company is launching its inaugural India equity long/short hedge fund under the name IDFC India Equity Hedge-Conservative Fund.
It is a category-III alternative investment fund (AIF) managed by Vijay Krishna Kumar, director of liquid alternatives at IDFC AMC, the company said in a statement.
As per the Securities and Exchange Board of India (SEBI)’s rules for AIFs, a category-III alternative investment fund is defined as a privately pooled investment fund, irrespective of its destination, in the form of a trust or a company or a body corporate or a limited liability partnership (LLP).
Category-III funds undertake leverage to a large extent and invest keeping in mind negative market conditions using complex trading strategies. These funds trade with a view to making short-term returns and are allowed to invest in category-I and category-II AIFs.
IDFC India Equity Hedge Fund will target annualised returns between traditional fixed income and long-term equity, while striving to be largely uncorrelated to either asset class across market cycles, said IDFC AMC.
“The fund is being launched by the company’s liquid alternatives division which focuses on offering products that are liquid, unique and add value to the overall asset allocation of sophisticated investors in domestic and international markets,” said Vishal Kapoor, chief executive officer of IDFC AMC.
The fund will seek to generate absolute returns with half the volatility of the Nifty. It primarily invests in Indian equities, derivatives, cash equivalents and arbitrage instruments.
“In the investment world, just like any other business, the prospect for generating returns is a function of two factors – the available opportunity set and the number of entities competing for it. Both these factors are very attractive in India. Unlike most developed and large emerging markets, India has only a handful of long/short funds since a majority of portfolio managers are focusing only on traditional buy ideas,” said Vijay Krishna Kumar, fund manager of IDFC India Equity Hedge Fund.
Established in 2000, IDFC AMC is among the top 15 mutual fund firms in India. Its average assets under management stood at Rs 66,361 crore in the July- September quarter.
In March 2017, IDFC Financial Holding Company acquired a 25% stake held by Paris-based Natixis Global Asset Management for Rs 244.24 crore ($37 million) in IDFC AMC thereby increasing its stake to 100%.
Early this week, VCCircle reported Avendus Group’s hedge fund The Avendus Absolute Return Fund touched Rs 3,300 crore ($520 million) in assets under management.
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