India’s ArthVeda eyes international markets

Indian fund manager targets UAE, GCC and other key global financial centres 

India’s ArthVeda Fund Management looks set to make forays into international markets and plans to launch several funds across the globe this year, its top official says.

The fund, which manages assets worth approximately $200 million, is expected to come up with funds for small and medium enterprises, housing and unlisted equity, as well as an agri and debt fund in the next two years. It is also exploring avenues for listing their funds on international bourses, including Nasdaq Dubai.

The fund management company is also considering to launch a real estate fund globally, primarily targeting pension funds and sovereign funds focused on yield-generating strategies.

“We will initially target UAE and GCC markets where we have the presence of our parent company DHFL [Dewan Housing Finance]. We will leverage that to establish a strong presence in the region for ArthVeda,” Bikram Sen, chief executive officer of ArthVeda Fund Management, told Khaleej Times in an interview.

ArthVeda Fund Management is a subsidiary of DHFL, the third-largest home mortgage finance company in India.

It is in the business of asset management, with a focus on alternative investment funds covering asset classes such as real estate, infrastructure, fixed income, traded markets, agriculture, debt and unlisted equities.

Sen further said the fund is also planning to enter international financial centres including Singapore, Tokyo, London and New York this year to expand its presence across the globe.

Excerpts from the interview:

How was 2013 for ArthVeda in terms of business?

2013 was a very good year for ArthVeda. We have operationalised two new verticals, traded markets and infrastructure, besides our existing real estate vertical. In our traded markets vertical, we have developed several global investment smart beta strategies focused on developed markets, such as ArthVeda Alpha US500, ArthVeda Alpha EU50, ArthVeda Alpha UK100 and ArthVeda Alpha Japan225.

We also have strategies in emerging markets, such as India and Sri Lanka. All of these strategies beat a majority of the comparable mutual fund universe and also the conventional market cap-based index, as well as the other smart beta strategies in the market. We have gotten a great response from UAE-based investors and wealth managers to these strategies.

In our real estate vertical, we have exited a number of investments in our first fund, the Dream Fund. We have made several investments in our second fund, the Star Fund. In our infrastructure vertical, we have received Sebi approval for our AIF fund under Category I.

How do you see outlook for 2014? What’s your expectation for the rest of 2014 after completing the first quarter?

The outlook for 2014 is definitely bright. Post-elections, people will again get down to business with a more positive sentiment. We think that the second half of 2014 should show improvement in macroeconomic indicators following investment and business activity. We will be launching a number of funds this year which will be targeted towards sophisticated investors, like pension funds, sovereign funds and HNWIs [high net worth individuals]. We are likely to launch several funds in the traded markets globally, with emphasis on the UAE and GCC, using our Alpha strategies. We will launch a large real estate fund globally, primarily targeting pension funds and sovereign funds focused on yield-generating strategies. We should end 2014 with some surprise announcements too.

How much assets does ArthVeda manage at present and what’s your target for the next three years?

Currently, we manage [or advise] less than $200 million. But we have built a strong foundation across our various verticals to be able to manage or advise several billions of dollars over the next three years.

Do you have a presence outside India? What’s your plan to expand operations in leading markets?

We will initially target UAE and GCC markets where we have the presence of our parent company, DHFL. We will leverage that to establish a strong presence for ArthVeda. Further, we are likely to expand into Singapore to tap the rest of Asia and then focus on New York and London as global financial centres.

The GCC has strong non-resident Indian base. What’s your plan to launch your fund in the region?

We will be launching a number of funds in the GCC across our verticals. However, we would prefer to enter this market in partnership with a local fund management company. We think a local fund management company will have better experience of local regulations as well as understanding of local investors, including NRIs, and their needs. We are in discussion with a few established fund managers and expect to finalise it in near future.

Are you in talks with Nasdaq Dubai for fund listing? What is the progress on this?

Nasdaq Dubai has been very forthcoming to provide us a platform to list our funds for offshore investors. However, as mentioned earlier ArthVeda would prefer to form a partnership with a local fund management company to launch funds in the UAE or GCC.

We are in discussions with several investment banks and exploring the establishment of the fund in the UAE for promotion of the fund to investors in the UAE and GCC. ArthVeda will be the advisor to the fund in the UAE. We are in discussions on the structure of the fund with prospective partners here, who have the right expertise on investment appetite, legal regulations and insights on fund structure. The fund[s] will cater not only to NRIs or PIOs [persons of Indian origin] but also local and regional investors and other offshore investors in both retail and institutional segments.

Aside from the UAE and GCC, what other markets are you interested to explore this year?

We will be targeting Singapore, Tokyo, London and New York since Singapore and Tokyo can be used as a base to reach out to professional investors in the rest of Asia, while London and New York are traditional financial centres for the developed markets and cannot be ignored. In light of our developed market strategies for the US, the EU, the UK and Japan, we think we have to be in these markets to capitalise on the same.

What alternative investments does your fund offer and how do you ensure minimum or best returns to investors?

We provide funds in traded markets, real estate and infrastructure. We are in the process of operationalising our unlisted equity, agriculture and debt verticals. Across asset classes, we follow a research-driven, value-investing framework. This focuses on identification of all risk factors that could lead to loss of capital. This is followed by developing strategies, techniques, structures and approaches which can eliminate and mitigate a majority of the risks.

The remaining risks are controlled in terms of their probability and impact. In the high-risk/high-return alternative asset class, the chances of losing capital are thus reduced significantly. We further focus on enhancing returns, thus generating alpha. This ensures that the investor gets not only the beta [or market returns] but an alpha in excess of the market returns.