Kotak Investment Advisors launches Fund of Funds, targets Rs 1,500-crore fund raise

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Following a slew of recent fund raises by venture capital (VC) firms targeting the Indian market, Kotak Investment Advisors on August 2 launched Kotak India Alternate Allocation Fund, a Fund of Funds (FoF) with a target to raise Rs 1,500 crore, including a greenshoe option of Rs 750 crore.

The FoF will be investing in other Private Equity (PE) and VC funds along with direct investments into companies. The fund will diversify across PE/VC funds in multiple sectors, including consumer, technology, healthcare, and financials as well as across multiple stages, from early stage to growth stage and late stage across different vintages.

‘Vintage’ is the first year when the fund starts investing in companies. Some part of the funds will be allocated for co-investment opportunities available from such investee funds.

Nidhi Chawla, Fund Manager, Kotak India Alternate Allocation Fund said, “Investors require an optimal alternate equity portfolio through diversification, right fund manager access and professional selection. Lack of knowledge and information availability in this asset class makes it difficult to take an informed choice. Diversification of risk across managers is tough due to high minimum investment requirements."

"Through Kotak’s Fund of Funds we intend to provide investors access multiple funds as well as leverage our institutional diligence with peer benchmarking data available, coupled with institutional monitoring of long tenure funds,” Chawla noted.

“The performance difference between best and worst fund managers in PE/VC funds can be as high as 15- 20 percent IRR, so manager selection is critical,” she added.

Srini Sriniwasan, Managing Director, Kotak Investment Advisors Limited said, “Indian alternate ecosystem has become vibrant with PE/VC fund managers delivering consistent returns and outperformance over public benchmarks. But many of the marquee fund managers have been inaccessible to domestic investors as they raised only offshore capital or had high minimum ticket investment requirements. With Kotak’s Fund of Funds, we intend to enable access to such funds and increase domestic overall participation in the Indian alternates industry”.

Over the past few months, several major VC firms specialising in early-stage investments had raised new funds, including  Sequoia Capital’s $2.85 billion fund raise, Elevation Capital’s $670 million round, Accel Partners $650 million round, Lightspeed Ventures’ $500 million round and recently B Capital's $250 million round. All of these funds are focused on finding bets in India and Southeast Asia.