Kotak halts India fund-of-funds
Kotak Investment Advisors (KIAL) has halted fundraising for its latest fund-of-funds, citing the challenging investment environment.
“In PE/VC investment, [the] vintage of the fund, i.e., the time to start deploying capital is very important. Presently, valuations are correcting; hence it is prudent for [fund-of-funds] to defer investing and catch a better vintage of funds. With this view, we have taken the call to postpone the PE/VC [fund-of-funds],” KIAL said in a statement referenced by Livemint and VCCircle.
The fund-of-funds, Kotak India Alternate Allocation Fund, was launched last year with a target of INR 15bn, including an overallotment option of INR 7.5bn. The remit was to build a diversified portfolio of funds with exposure from early-stage to late-stage deals and across sectors such as consumer, technology, healthcare, and financial services.
The product was largely aimed at the local high net worth individual (HNWI) segment, which has increased commitments to PE and VC in recent years. KIAL has previously tapped this trend through pre-IPO funds. The most recent vintage launched in 2021 and reached a first close of INR 13.9bn within three months, beating the INR 10bn target. A final close of INR 20bn came in early 2022.
That fundraise coincided with an investment boom in India, which saw a record USD 65.6bn deployed, up 52% year-on-year, according to AVCJ Research. Investment moderated to USD 42.6bn in 2022 and then a mere USD 5.3bn was put to work in the first quarter of 2023 amid concerns about the global economy, a slowdown in exits, and question marks regarding valuations.
Livemint reported that KIAL has begun discussions with LPs in the fund-of-funds about returning capital that has been drawn down.
Fundraising for India-focused vehicles reached USD 16.9bn in 2022 – also a record, with venture capital accounting for two-thirds of the total. In the first three months of 2023, USD 2.3bn was raised. This included a USD 1.25bn first close for KIAL’s latest special situations fund.
KIAL is an alternate assets business within Kotak Mahindra Bank. It has raised more than USD 8.7bn since its establishment in 2005, with USD 3.6bn coming in the past 12 months alone. There are independent investment teams and funds for each asset class, including private equity, real estate, infrastructure, special situations, and listed strategies.
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