Kotak's maiden FoF eyes first close with Rs 500-crore commitment

Kotak Investment Advisors, which launched its maiden Rs 1,500-crore fund of funds (FoF) earlier this month, hopes to make the first close by the middle of September, garnering around Rs 500 crore.

Established in 2005, Kotak Investment Advisors is the largest homegrown alternate asset fund, managing USD 5.7 billion (around Rs 45,000 crore) across, real estate funds, infrastructure funds, special situations fund, listed strategies (stocks), and pre-IPO investments.

Its stressed assets fund is the largest in Asia with assets under management worth over USD 1 billion (about Rs 7,900 crore).

According to a Crisil report, as of March 2022, the total investment commitments in the alternate investment funds (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 were into 93 category I funds, which are mostly early-stage venture capital and social impact funds; Rs 1,47,654 crore into 240 category II funds (listed and unlisted equity funds, realty and debt funds) and Rs 53,413 crore into 170 category III funds, which are long-only and short-only equity funds.

The Kotak India Alternate Allocation Fund, which was launched on August 3, is the maiden fund of funds (FoF) from the company. It will invest in other domestic private equity/venture capital funds along with direct investments into early, growth and late stage companies which are into consumer, technology, healthcare and financial sectors, with a ticket size of Rs 35-150 crore.

It also intends to invest some money into co-investment opportunities available from such investee funds.

"We've set a minimum ticket size of Rs 1 crore for investors, because 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 the middle of September," Nidhi Chawla, manager of the FoF, told PTI.

The fund has a long-term investment cycle of maximum 12 years and a minimum of 7-10 years.

Some of the marquee investments by Kotak Investment Advisors include Nykaa, which went public last year, Pinelabs, Dailyhunt, Policybazaar and Swiggy, among others.

She said the objective of this fund is to give investors an optimal alternate equity portfolio through diversification by providing them with access to multiple funds.

The performance difference between the best and worst fund managers in PE/VC funds can be as high as 15-20 per cent IRR (internal rate of return), so manager selection is critical, she added.