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 portfolio diversification.

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