Kotak Investment Advisors, which launched its first fund of funds (FoF) of Rs 1,500 crore earlier this month, hopes to complete the first close by mid-September, raising around Rs 500 crore.
Established in 2005, Kotak Investment Advisors is the largest local alternative asset fund, managing USD 5.7 billion (about Rs 45,000 crore) in real estate funds, infrastructure funds, special situations funds, listed strategies (equities) and pre-IPO investments.
Its stressed asset fund is the largest in Asia with assets under management worth over $1 billion (around Rs 7,900 crore).
According to a Crisil report, as of March 2022, total investment commitments in the alternative investment fund (AIF) industry stood at Rs 4.41 lakh crore between category I, II and III funds.
Of the total Rs 2.33 lakh crore of incremental fund inflows between FY21 and FY22, Rs 31,988 crore was in 93 Tier I funds, which are mainly start-up venture capital and social impact funds; Rs 1,47,654 crore in 240 category II funds (listed and unlisted equity funds, real estate and debt funds) and Rs 53,413 crore in 170 category III funds, which are long-only and short equity funds -only.
The Kotak India Alternate Allocation Fund, which launched on August 3, is the company’s first fund of funds (FoF). It will invest in other national private equity/venture capital funds as well as direct investments in early-stage, growth and late-stage companies that are in the consumer, technology, health and finance, with a note size of Rs 35-150 crore.
It also intends to invest money in co-investment opportunities available from these beneficiary funds.
“We have set a minimum note size of Rs 1 crore for investors as we want to diversify the investor base and we plan to make the first close with a commitment of at least Rs 250 crore and a maximum of Rs 500 crore, by mid-September,” FoF director Nidhi Chawla told PTI.
The fund has a long term investment cycle of 12 years maximum and 7 to 10 years minimum.
Flagship investments from Kotak Investment Advisors include Nykaa, which went public last year, Pinelabs, Dailyhunt, Policybazaar and Swiggy, among others.
She said the goal of this fund is to give investors an optimal alternative equity portfolio through diversification by giving them access to multiple funds.
The difference in performance between the best and worst fund managers in PE/VC funds can be as high as 15-20% IRR (internal rate of return), so manager selection is critical, she added.
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