What is the first product of HDFC AMC in alternative assets

The FOF is currently open for membership. As per its presentation, the AMC is planning to raise Rs. 1,500 crore with an option to collect up to Rs. 1,500 crore more through the greenshoe option. The FOF is expecting its first closure before the end of March.

As per SEBI regulations, the minimum commitment amount in an AIF is Rs. 1 crore. With a view to make the scheme accessible to more investors, the AMC will take this commitment amount over a period of five years. As a FOF, the scheme will provide investors with an opportunity to invest in multiple AIFs without having to invest huge amounts individually in each of these funds. According to the AMC, FoF is for investors who seek diversified exposure in the unlisted space – with a portfolio comprising investments in zero-day to pre-IPO stage ventures.

about the fund

HDFC Select AIF FOF – I will invest in 12-15 VC/PE funds, across stages (funds that invest in early and late stage ventures), sectors and vintages (different starting years for investing investor’s money) as well as the underlying fund). Among the criteria for shortlisting the funds are – investor profile of the underlying funds; the quality of the fund team; fund exit record; and governance standards. In terms of investor profile, funds that attract domestic and foreign institutional investors will be viewed more positively.

To ensure skin in the game, the AMC will deposit at least 10% of the capital raised from customers into the fund from its own capital. The tenure of the FoF will be 11 years, with an option to extend the tenure by up to two years (one year at a time), subject to the approval of two-thirds of the investors by the value of their investment. The tenure of the underlying funds will range from 7-10 years (plus two years). The FoF expects to start retiring capital (returning money to investors) from the sixth year.

There will be two share classes of investors in the FoF. Class A will be charged an annual management fee of 2% (of the committed amount for the first five years, and thereafter, of the net capital invested). The annual management fee for Class D will be 2.5%. In addition, both the segments will be charged a one-time set-up fee of up to 0.1%, annual operating expenses of up to 0.15% and a performance fee (profit share) of 20%. This includes fees charged by the underlying funds. Since the underlying funds are Category-I and Category-II AIFs that enjoy tax pass-through status, they will return the entire capital to the FoF (no TDS or tax deducted at source). The FoF will deduct 10% TDS before passing on the investment income to the investors.

Non-resident Indians (NRIs), except those outside Canada and the US, can invest in the fund. However, US-based NRIs can invest in the fund, provided they are in India at the time of investment.

other fund

While this is HDFC AMC’s first AIF, it is not the first FoF in the sector. Kotak Mutual Fund and Nippon India Mutual Fund also have FOFs that invest in AIFs, as does Waterfield Advisors.

Lowai Navlakhi, CEO of SEBI-registered investment advisory firm International Money Matters, says he does not see any compelling reason to invest in HDFC Select AIF FOF-I. , then it is worth evaluating. Otherwise, I’ll wait for a track record before recommending it. 1 crore to Rs. 7 crores to make a total investment in the venture capital space, and for that amount, they cannot get enough diversification across funds in this space. The minimum investment for some of these funds may otherwise be quite high. This is definitely not a product for HNIs, Ultra HNIs and family offices.