The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Karma was established in 1995 to manage money onshore. It is a boutique with around $15 million of assets under management, and the offshore hedge fund will launch with $10-15 million but with a capacity of up to $250 million.
Karma started off advising an India hedge fund managed by Julius Baer, but then Baer acquired GAM, which in turn took charge of asset-management activities. Its partners decided to give up this business in order to concentrate on establishing their own products. In addition to the small onshore business, they are now introducing the Evergreen Fund for international investors.
The three founders of Karma are Rushabe Sheth, Nikhil Desai and Tejas Dave.
Sheth has 14 years of experience in IndiaÆs asset-management industry. He was CIO at Kotak Mutual Fund and also worked in the portfolio management group of Kotak Securities, which has a joint venture with Goldman Sachs. Like the other founders, he got his start at ASK Raymond James (a joint venture in which ASK has just bought out Raymond JamesÆs stake) in asset management and business development.
Desai also got his start at ASK Raymond James, where he ran equity portfolios, but most recently was head of equities at the private banking arm of ABN Amro. He has 13 years of investment experience in India. Dave has over 11 years of experience running operations for ASK Raymond JamesÆs fund-management business, and serves as COO at Karma.
ôThe concept behind Karma is that itÆs hard to manage equities in India along the lines of traditional institutions,ö says Sheth. ôThe imperative at big companies is to grow assets regardless of the impact on long-term returns.ö
The team members have worked together in absolute-return environments and, until shorting became possible through the futures market, had to achieve positive returns with only long-only tools. Hedging remains limited onshore, but the Securities and Exchange Board of India has indicated it will allow institutions to short cash positions as well as lend and borrow securities. Details have yet to be worked out, but the ability of funds to take bi-directional views on companies is going to expand.
The management fee is 1.5% and there is a 15% performance fee, but Sheth says the firm may cut these to 1/10 for the first $25 millionÆs worth of investment. It targets returns around 20% with 15% volatility, investing in large- and mid-cap stocks. It has a lot of scope for taking views, with the ability to move the portfolio to net short -50%, although most of the time it will be moderately long-biased, around 30-75%.
Citigroup is the prime broker, while Deutsche Bank is both fund administrator as well as global custodian for Antara in Mauritius.
Given the high valuations in todayÆs market, will the fund start off net short? Sheth wouldnÆt detail the strategy but says: ôThe marketÆs not cheap, letÆs put it that way. ItÆs not extremely attractive, but there are still opportunities where we can go net long. For the past four years, the market has been uni-directional with a few blips. Now itÆs consolidating. There have been a lot of so-called long/short funds that have been very long-biased. The true long/short funds will be tested now.ö
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