A Kotak Mahindra Bank arm is targeting to raise up to Rs 1,500 crore to invest in private equity and venture capital funds. Kotak Investment Advisors (KIAL) said it is launching the Kotak India Alternate Allocation Fund (KIAAF), a ‘fund of funds’, which is targeting to raise Rs 750 crore with a greenshoe option of another Rs 750 crore.
It will invest across PE/VC funds in multiple sectors, including consumer, technology, healthcare and financials, and the money invested by it will be deployed for taking equity stakes in companies across multiple stages, KIAL said in a statement. The alternate assets business of the private sector lender will also be looking at co-investment opportunities to take direct equity stakes in companies along with the investee PE/VC funds, it said.
“Lack of knowledge and information availability in this asset class makes it difficult to take an informed choice (for investors). Diversification of risk across managers is tough due to high minimum investment requirements,” KIAAF’s fund manager Nidhi Chawla said, adding investors can get access to multiple funds through such a play.
Chawla said selecting the right manager is critical because the performance difference between the best and worst of PE/VC funds can be as wide as 15-20 per cent on the internal rate of return. KIAL’s managing director Srini Sriniwasan said 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.
KIAAF is being set up as an Alternative Investment Fund (AIF) under capital markets watchdog Sebi’s regulations.