The Hedgeweek Interview - R Rajagopal, Kotak Mahindra Bank: "Our investment strategy is adaptive to different stages of the market cycle"
R Rajagopal, principal investment manager of the Kotak India Dynamic Fund, says the newly-launched fund is one of the few Indian absolute return equity funds backed by a leading Indian financial services company.
HW: What is the background to your company?
RR: With a presence outside India since 1994, the international subsidiaries of Kotak Mahindra Bank, operating through offices in London, New York, Dubai, San Francisco, Singapore and Mauritius, specialise in providing services to overseas investors seeking to invest into India.
Kotak is the only India-dedicated investment services provider to have a large on-the-ground presence in the country. Having set up the international business in 1994, Kotak enjoys the benefit of being registered with and regulated by the relevant authorities in each of the countries it operates in.
The offerings from Kotak are differentiated India investment solutions that span four strategies: long-only strategy (large capitalisation, mid capitalisation, multi capitalisation, thematic and concentrated); quasi-private equity strategy; dynamic strategy; and cash alternative strategy.
Kotak's new offering, the Kotak India Dynamic Fund, is the first multistrategy equity fund in the dynamic strategy space and one of the few Indian absolute return equity funds backed by a premier Indian financial services company. The team of three behind the fund consists of myself as the principal investment manager and Venkatesh Chari and Abhishek Mimani as co-investment managers.
HW: Who are your service providers?
RR: Our accounting firm is Deloitte and Touche, our law firm is Allen & Gledhill and the fund administrator is Multiconsult. At the moment the fund does not intend to use a prime broker.
HW: How and where do you distribute the fund? What is the profile of your current and targeted client base?
RR: We cover most of the European market through our London office, the west and east cost of the US from New York and San Francisco, South-East Asia from Singapore office and Middle East and Africa through our Dubai office. Funds are directly distributed to institutions and some family offices by our internal sales force. In various markets, we reach out to high net worth individuals through private banks and independent financial advisors.
HW: What is the investment process of your fund?
RR: The fund is expected to follow an investment approach based on risk/reward assessment to control the volatility of the fund during all market scenarios. For this purpose, we employ four investment strategies - core equity, long/short equity, limited risk and cash/arbitrage - that can utilise different market conditions to generate absolute returns. The primary strength of our investment strategy is that it is multi-dimensional and adaptive to different stages of the market cycle.
HW: How do you generate ideas for your fund?
RR: Ideas are generated through our research team based in Mumbai and through street research. We will also be using proprietary screens and models to generate ideas.
HW: What is your approach to managing risk?
RR: We measure risk by a proprietary system that measures risk at the fund, investment manager and strategy levels and generates intra-day and end of day risk reports. Risk monitoring will be done on a regular basis by the middle office, which will send reports on a daily basis to the risk committee. We will then follow up the recommendations of the risk committee.
HW: What opportunities are you looking at right now?
RR: The key opportunities we are looking at are a number of bottom-up fundamental stock ideas and specific trading ideas on the long as well as the short side.
HW: What developments do you expect in your sector in the year ahead?
RR: The upcoming national elections and how the Reserve Bank of India tackles the inflation issue will be the key developments affecting our sector in the year ahead. The portfolio risk will be dynamically adjusted based on events as and when they unfold.
HW: What differentiates you from other managers in your sector?
RR: As a team we have a combined experience of close to 30 years in the Indian financial market. This helps us bring diverse skill sets to the portfolio construction.
HW: Do you have any plans for other product launches in the near future?
RR: The Kotak management will decide this based on market opportunities and investor demand.
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