Funds managed
| Fund name | Asset Class | License |
| Multi Strategy Absolute Return (MSAR) | Hedge fund | SEBI AIF Cat 3 |
| Enhanced Long Equity Scheme (ELE) | Long short equities | SEBI AIF Cat 3 |
About the AMC
- Founded in 2013
- Firm majorly focusses on commodity markets, equity markets, structured credit, and quantitative strategies
- Fund Manager – Mudit Singhania, Prashant Mohanraj
- About Fund Manager- Worked as senior Manager at Edelweiss Capital
Investment Philosophy (for firm)
We believe that the market beta is easily available to all investors, and asset management is only about alpha creation. We therefore believe clients should only be charged for the performance that we deliver
Investment Process
Partnership-driven firm
- Alpha Alternatives is a platform for investment managers who have strong credentials / track records and an entrepreneurial mindset to join us as Entrepreneur Partners (EP’s).
- The firm offers the resources of a large organization, paired with the equity-ownership opportunity of an independent/proprietary setup. We provide strategic thought partnership, capital raising, operational backend, risk management, hiring, accounting, regulatory and compliance support. We bring significant scale and expertise to the delivery of non-investment management functions, allowing our talented investment managers to focus on what they do best.
- The quasi-entrepreneurial status of the fund managers ensures that they only focus on their core expertise in investment management. Their single-minded focus on alpha generation combined with the support of our platform enables the growth of the business, thus resulting in value creation for all stakeholders
Proprietary capital to build asset management solutions
- We are a well-capitalized platform that uses proprietary capital to:
- Take the initial seeding risk and build a track record, and identify & mitigate investment risks and operational challenges
- Take the burn of building a business – towards product development and building the operational, risk management and execution infrastructure
- Establish systems and processes that provide complete transparency and cost efficiencies for investors
- We have a significant portion of our individual net worth invested into our products alongside our investors, thus creating alignment of interests
Creating alpha, not seeking alpha
As our name suggests, we are driven by creating alpha in the ‘alternatives’ space. We believe that sustainable alpha generation needs a sustainable approach that can be clearly quantified. We believe that while a market like India provides tremendous opportunities to seek alpha, to drive sustainable returns we need to be able to consistently “create alpha”.
We do this across our asset classes by:
- Identifying opportunities falling in between the wide spaces of two different asset classes, thereby not getting arbitraged away by professionals in either space
- Adding elements that allow us to change the trajectory of returns through an active operating role in our portfolio companies by changing their strategy, operational and financial health, and even their capital markets presence
- Down selling and agency businesses to further enhance returns on the core portfolio
- Using leverage to efficiently utilize capital and scale up on timely opportunities
Performance-driven asset management model
- Our investment strategies are those that are typically used by large proprietary desks. These may not be the largest AUM generators but are normally driven towards the best risk-adjusted returns delivery.
- We offer fee structures that are completely aligned to our “alpha creation” philosophy. We do not charge any fixed fees to our clients. We believe that the beta of the market should be freely available and our fee structures should be derived from the alpha that we generate for our investors. We continue to maintain this philosophy across all our products and asset classes.
Media
Angel investing most interesting alternative asset class, hubbis learning, Sept 16, 2014
https://www.hubbislearning.com/articles_content.php?aid=1411021588
Mudit Singhania, director at Commodity Alpha, presented the case for arbitrage trading in agri-commodities.
The market for agricultural commodities has disparity in demand and supply; while demand is evenly spread during year, the supply is skewed to three to five months. The demand/supply gap allows traders to execute a “cost of carry arbitrage”. The lack of professional players in this market provides opportunities to investors with capital with returns in the region of 18% to 22%.
Singhania said that there is very little capital available in the space and this is why this opportunity continues to exist. The space is not accessible to investors like FIIs, mutual funds, banks, and NRIs. On time horizon, Singhania pointed out that it coincides with the rabi and kharif crop cycle which happens every six months thus eliminating reinvestment risk.
Singhania pointed to the inefficiency of the commodities markets, which could be compared with the equity markets early to mid-90s. “When that market was fairly young in early 90s, a lot of scams happened. But now the markets have evolved. But this is yet to happen in commodities space. The badla system which was prevalent in equities was giving you close to 24 to 25% annualised returns. The Agri commodities space is at a very similar stage currently. Until the time there is limited capital available and lack of professional players in the space the return will continue to exist.”
Singhania agreed that access will come, but the question was when, because the basic things such as derivatives market on the commodities space does not even have options trading. The derivative market is the 100th of the actual physical market size whereas it should be the exact opposite.
“FCRA is not yet implemented that should come through. So in the entire space there will be metals push and energy push and then finally the push will come in the agri space. The agri markets are more conservative in nature, in the entire commodities space.”
From a regulation perspective, one needs a VAT/sales tax registration in every state where one operates. In addition to that one should have an APMC license in each location where the crops are grown and supplied. As long as one is complying with these, there is no regulatory hurdle. Any person/corporate who is complying with these can go and procure agri commodities. As pointed out in the presentation the arbitrage exists primarily because of 2 reasons, shortage of capital and execution expertise.
Finally there are middle men who procure the crop from the farmers by paying immediate “cash”. Access to credit facilities would surely benefit the farmer, but that middle man who is paying immediate cash will not be happy because his margins will now be impacted. Organised arbitrageurs/traders should not be impacted by this credit facility because they procure the crop from these middle men and not the farmer directly.
Commodity ki pathshala by NCDEX, Moneycontrol, Apr 13, 2020
Working in the commodities market, it helped individual investors to diversify and add commodities to their portfolio. Further, panel discussion also gave an insight into Futures and Options, deliveries for commodities, cash and carry strategy and addressed the gaps in commodity investing. Commodities are cyclic in nature and work as per seasons. The new norm of SEBI restricts the contract to be obligated.
Analyst questions –
- What would be the best alternatives that you would like to suggest to retail investors?
- Can ETFs help an investor to gain commodities exposure?
Prepared by – Taniya Nagpal
Peer reviewed by – Ridhima Jaisinghani
Date – 12th May
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