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KKR-backed Avendus floats $75 mn hedge fund

15 February, 2017

Alternative investment giant KKR-backed diversified financial services firm Avendus Group has launched a hedge fund after recently hiring the core team that managed Mumbai-based Ambit Holdings’ asset management business, the firm said in a statement.

The long-short fund, a category-3 alternative investment fund (AIF), will have a target size of Rs 500 crore ($75 million) and will invest in listed Indian equities as well as equity derivatives. The fund will be operated by Avendus Capital Public Markets Alternate Strategies LLP.

The fund will start operations once clearance from capital markets regulator Securities and Exchange Board of India (SEBI) comes through, Avendus said.

“The fund will target to produce absolute returns with lower volatility than the overall stock market,” it said.

Andrew Holland and Vaibhav Sanghavi—who were previously CEO and managing director, respectively, at Ambit Investment Advisory—will manage the fund along with a team that had managed one of the largest domestic AIFs at Ambit.

In 2016, Bloomberg had ranked its previous fund in the top 91 percentile among 800 global hedge funds.

As per SEBI’s AIF rules, a category-3 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-3 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 make 

short-term returns, and are allowed to invest in category-1 and category-2 AIFs.

Ranu Vohra, managing director and chief executive officer, Avendus Capital, said, “With this fund, we are confident of building a formidable alternative asset management business, both local and globally. We have ambitious plans to significantly grow our alternative asset management business as we propose to launch our first equity long/short AIF.”

Mumbai-based Avendus hired the entire top management of Ambit Investment Advisory that includes its CEO Andrew Holland and a team of eleven members in September to manage its new hedge fund business.

Holland was managing Ambit Investment Advisors’ flagship hedge fund, Ambit Alpha Fund,  which was the largest category-3 AIF in India. It was launched in June 2013 with assets under management (AUM) of Rs 20 crore ($3.25 million then) raised from Ambit Holdings and a few affluent individuals. The fund was sold off to Edelweiss Financial Services Ltd for an undisclosed amount.

With the launch of the new hedge fund business, Avendus is targeting a portfolio size of $2 billion in the next five years.

Avendus’ new business would be in addition to the existing business of Avezo Advisors Pvt. Ltd (Avezo), a joint venture with Zodius Capital, headed by Neeraj Bhargava. Avezo has an AUM of $200 million in investments across technology companies and private investment in public equity (PIPE) deals, Vohra said. 

Avezo is an advisor to two families of funds that are investing businesses in India. Its growth funds invest in listed Indian mid-cap companies with a long-term ‘buy and hold’ strategy, according to its website.

It bets on companies that benefits from India’s rising consumption, increasing urbanisation and the rapid adoption of digital technologies.

The team has built an impressive track record since 2009, making long-term investments spread over three funds which have outperformed market indices. Moreover, it has built a deep understanding of the Indian mid-cap universe of around 500 companies and has evaluated around 50% of them.

In recent appointments in the asset management space, diversified financial services firm IDFC Ltd named Vishal Kapoor as CEO of IDFC Asset Management Company in July. In June, Avendus Wealth Management appointed Swati Singh—who was previously with IIFL Wealth Management—as executive director and head of fixed income. 

In November 2015, KKR agreed to invest in Avendus Capital for a 70% stake through a combination of new shares and a secondary sale of stock by existing investors. The acquisition enabled Avendus scale up its services in wealth management and private equity, besides foraying into the NBFC space with credit solutions.

KKR purchased shares from Eastgate Capital and Americorp Ventures, an early investor in Avendus. These two investors together held around 41% stake in Avendus.

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KKR-backed Avendus floats $75 mn hedge fund

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