Hedge Fund (Absolute Return Strategy)
Hedge funds provide benefits to capital markets by contributing to market
efficiency and enhancing liquidity. They often assume risks by serving as ready
counter parties to entities that wish to hedge risks. Hedge fund can also serve
as an important risk management tool for investors by providing valuable
Hedge fund strategies are typically designed to protect investment principal.
Hedge funds frequently use investment instruments (e.g. derivatives) and
techniques (e.g. short selling) to hedge against market risk and construct a
conservative investment portfolio - one designed to preserve wealth.
Karvy Capital Ltd. Is licensed by SEBI to be the investment manager and
sponsor for category III Alternate Investment Fund (AIF).
Arbitrage Opportunities Fund
The Arbitrage Opportunities Fund aims at providing returns superior to liquid
funds on a post tax and post cost basis without taking any market risk at all.
The only strategies to be implemented in this fund are based on strict arbitrage
in listed securities such as futures, options and stocks.
The conventional cash futures arbitrage has largely been exploited and has
increasingly become harder to find. However, on the options side there are still
several opportunities of arbitrage. The Arbitrage Opportunities Fund takes up
trades only when certain to make a minimum amount of returns above the liquid
funds returns. At other times it will stay in cash. The trades, being arbitrage
driven, have no uncertainty in their returns once taken. The worst case for the
fund is hence a complete lack of opportunities - in which case the fund would
simply generate returns at par with the liquid funds.
Karvy Capital Ltd has built the team for managing this fund over the last two
years and has been investing proprietary capital in building its absolute
returns strategies. Our approach is based on robust and well established
techniques to spot market inefficiencies and use them to deliver market-neutral
absolute returns. We follow a multi-pronged risk management framework. Also
considering the relative lack of exposure of Indian investors to hedge funds,
Karvy Capital Ltd has published an educational publication on hedge funds -
named 'Leading Hedge'.
SEBI Registered Category III Alternate Investment Fund - IN/AIF3/13-14/0045