Author : Aequitas
Aequitas Offshore Fund: Overview, Objective, Strategy, and Benefits
Offshore Fund Overview
Aequitas India Fund (OEIC) limited is a company established in the Dubai International Financial Centre (the “DIFC”) and registered as an open-ended investment company. The fund is registered with the Dubai Financial Services Authority (the “DFSA”) as an Exempt Fund and a Hedge Fund..
Key Objective
The primary investment objective of the Fund shall be to generate capital appreciation over the medium to long term by investing into securities listed on recognised stock exchanges in India at the same time minimising risk. This shall assist in adequate generation of returns to investors over the long term and will have a low churn ratio in its portfolio. In the long run, the Fund seeks to outperform the benchmark Indian indices.
Aequitas’ Offshore Fund Management Strategy
Aequitas is one of the few Indian CAT 3 AIF funds to start a USD denominated offshore fund under DIFC. Through Aequitas’ offshore fund management, investors based in countries other than India can invest in the Indian markets – guided by Aequitas’ investment philosophy.
Aequitas’ offshore fund uses the same strategy and research process as Aequitas’ PMS and AIF. The offshore fund simply provides global investors a chance to effectively invest in one of the fastest growing markets in the world i.e., the Indian market.
Our research process utilises the best-in-class research team, with a singular focus on finding value stocks. At Aequitas, we believe in focusing on what we do best – instead of chasing after the trending strategy. This is why we follow only one strategy, across our products. Our strategy relies on 3 pillars, namely:
Growth: The markets reward growth by assigning higher PE multiples to growth companies. However, growth itself is cyclical and historical growth is already reflected in the current stock prices. We seek to identify industries which are likely to do well in the future. Companies with strong balance sheets and a management with proven track record and growth mindset.
Contrarian: Contrarian investing doesn’t mean doing the opposite of others but rather doing things differently from others. To find multibaggers, one cannot look in places that have already been discovered. The real oasis of potential lies in undiscovered sectors – which is exactly what we do at Aequitas. Sectors that are not yet ‘hot’, are the ones that attract our attention.
Value: The final and most important pillar is value. At Aequitas, we are sticklers for value. We aim at investing in stocks which trade at a significant discount to their intrinsic value. We aim at buying the best companies in industries out of favors.For us margin of safety remains the cornerstone of our investing philosophy.
Offshore Benefit’s with Aequitas’ offshore fund, investors can expect the following benefits:
Tax saving:
One of the major things to keep in mind when investing through any fund structure is the tax implication. Non-resident investors in the fund selling / redeeming their interest in the Fund and the consideration is received outside India, the gains arising from such sale/redemption should not be subject to tax in India. Further, through Aequitas’ offshore fund, investors enjoy the advantage of not having to pay 18% GST on the fee.
Jurisdiction:
DIFC is an SEZ that is a neutral jurisdiction. A neutral jurisdiction refers to a geographic area or country that is not aligned with any particular group or alliance and is neutral in conflicts or disputes between other parties. This neutral position makes offshore funds a safe way to invest in Indian markets and also reduces transaction costs.
Ease of Process:
India is one of the fastest growing markets in the world. But for investors based outside the country, the process of investing in India can become quite cumbersome and tedious. With Aequitas’ offshore funds international investors can invest without the hassle of converting their funds to INR.
Structural advantage:
Since this is a fund structure, existing investors always benefit from fresh money flowing into the existing pool. This gives the offshore fund manager the freedom to invest in new ideas as per the correct market conditions. For the investors, even without topping up or putting in fresh money of their own, they are able to enjoy the advantages of fresh ideas being undertaken by the fund manager.