About
ProAlpha Capital was formed in 2016 to implement fundamental, quantitative and systematic trading strategies that its team had been developing since 2008 and managing since 2011. It focuses on both technical and fundamental quantitative strategies aimed at the Indian market.
It is the only F&O manager regulated by US regulators.
It is a pioneer in the derivatives space in the country. Their strategies focus on generating alpha in rising, falling or flattish markets and their forte is that of strict investment discipline and strong risk management techniques.
The firm is registered with Securities and Exchange Board of India (SEBI) and currently manages and advises HNI’s, FO’s and corporates across various strategies.
SEBI PMS Registration No: INA000009065
Key staff
Rishi Kohli- Managing Director and CIO: He is responsible for the overall management of ProAlpha Capital’s public equities investment strategies including portfolio construction and risk management. Graduated from the prestigious institutes of IIT, Kanpur and IIM, Lucknow, his experience in the Indian capital market goes back to 2001.
Rajesh Bhatt- VP, Operations
Koushik Khant- VP, Finance
Investment philosophy
ProAlpha Capital essentially employs two investment philosophies:
- A quantitative and systematic trading methodology with robust risk management: A systematic quantitative methodology has clear rules for entry/exit of trades, defined trade goals and risk controls which bring discipline into the process of trading and investing. This has significant advantages over the long-run. It also helps avoid human cognitive biases, from the most basic greed/fear cycle to others like recency bias, confirmation bias, endowment effect and disposition effect.
- Diversification across multiple non-correlated models: Recognizing that every model or trading methodology will perform poorly at some point based on market conditions, utilizing a portfolio of models which have low correlations with each other in losing periods (meaning that majority of them are not losing together at the same time) reduces portfolio risk, thereby helping avoid large losses.
Funds managed
1 ProAlpha Yield Strategy (PAYS):
Objective & investment approach:
It is an advisory managed account product with low risk volatility arbitrage strategy on Nifty and BankNifty. Its objective is to generate consistent steady returns of average 12-16% annually.
Investment Approach summary:
- Strategy captures the Implied Volatility (IV) spread between Nifty/BankNifty indices and their respective top-weighted stock constituents.
- Basket of stocks from both the indices are shortlisted based on certain proprietary rules and criteria and Calls are shorted on these stocks.
- Upside risk is completely hedged through respective Long Stock Futures and downside risk through Long Index Puts of equal notional value to the long stock futures basket.
- It is a completely rupee-neutral/market-neutral trade thereby eliminating directional risk and gap-risk of the markets.
2 ProAlpha QG Dynamic Equity Strategy (QGD):
Objective & Investment Approach:
- A strategy that invests in the equity market with a unique feature of dynamic Nifty hedging that helps to minimize losses during large declines in the equity market.
- This feature eliminates the need to time entry and exit into equities.
- This Strategy provides strong long-term compounded returns like an equity strategy while reducing losses in large crashes or bear markets.
Portfolio inception Date: January 2014
Performance since inception: annualized net return of +15%
Minimum investment: INR 1 Crore.
3 Systematic ProAlpha India Nifty Trading (SPRINT):
Objective & Investment approach:
- It is a short-term managed futures strategy that trades only Nifty Futures using multiple diversified quantitative models focused on capturing upside and downside momentum.
- The futures strategy tends to perform well when volatility spikes (long volatility strategy) in either direction or large directional moves happen on either the upside or the downside, hence enabling it to deliver consistent non-correlated returns across all market conditions.
Portfolio inception date: in FY-11
Performance since inception: annualized net returns of +19%
4 Nifty Hedging Model:
Objective & Investment approach:
- Strategy dynamically hedges using Nifty futures and options through 6 different systematic models.
- Given the model’s high negative correlation with Nifty, its high returns in strong declines of the Nifty index and the fact that it has been a zero cost hedging model over rolling 3 years period relative to a 2-4% annualized cost any hedging strategy would have typically incurred, this model has demonstrated a highly attractive hedging capability for the long-run.
- This model can be overlaid on a long-only equity/equity-oriented MF portfolio as the final result is higher compounded returns.
- The losses and volatility of the combined portfolio reduces despite the higher returns.
5 FX Hedging Advisory:
Objective & Investment Approach:
- It is a strategy that removes the need to have a view on the movement of the INR/USD and helps funds and corporates manage their currency exposure in a more organized, consistent and systematic manner.
- ProAlpha offers an INR/USD dynamic currency hedging overlay on a sub-advisory basis.
- The strategy is designed to pick up the movement of INR/USD price movement and help clients to manage their currency risk effectively.
Media
Analyst questions
1 Your website doesn’t mention the AUM of the portfolio. What is the AUM of the portfolio and how consistently is it growing?
2 In the QG dynamic fund, what are the proprietary rules and criteria based on which basket of stocks are shortlisted from Nifty/Bank Nifty indices?
3 Why are the insights such as Portfolio composition, investment management fees, benchmark and minimum investment for the funds managed missing on your website?
Prepared by Juhi Modi
May 2021
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