Zerodha co-founder Nikhil Kamath’s True Beacon launches new fund to invest in equities, tax-free bonds

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Updated: August 05, 2021 11:48 AM

This is the second fund launched by the company. True Beacon, earlier this year, launched GIFT City's first global hedge fund to cater to international investors.

tax free bondsWhile the brokerage expects the policy normalisation to begin from late FY22, it thinks liquidity surplus recalibration can begin sooner.

Asset management company True Beacon has launched a new alternative investment fund, which will invest in equity and tax-free bonds, its co-founder Nikhil Kamath said on Thursday. This is the second fund launched by the company. True Beacon, earlier this year, launched GIFT City’s first global hedge fund to cater to international investors.

The new fund, a Category III AIF True Beacon Two, is a multi-asset fund that will consists of dynamic equity and a tax-free fixed income component, Kamath told PTI. The fund is aiming to deliver low-risk stable returns by dynamically rebalancing between asset classes, he said.

“The ideal split will be 65:35 — 65 per cent to equity and 35 per cent to tax free bonds on an average over the long term. Tax-free bonds are the safest asset class in India. These instruments are very safe and stable,” he added. He, further, said the new fund will be ideal for new investors who are looking to scale equity exposure.

The fund will invest in the country’s largest 200 companies to capture value appreciation combined with a sovereign-backed debt component to hedge against inflation and volatility. “We are aiming to deliver an annual return of 9-10 per cent to investors through the new fund,” he added. True Beacon was established in 2019 by Kamath, who is also the co-founder of stock broking platform Zerodha.

It is a disruptive asset management company with a zero-standing fee model, wherein only the gains are charged at 10 per cent, at the end of the financial year. Headquartered in Bengaluru, True Beacon manages assets worth Rs 1,300 crore with over 300 HNI (high net worth individuals) and UHNI (ultra high net worth) clientele from across the world.

According to Kamath, the company’s flagship fund, True Beacon One, which was launched in September 2019, outperformed the Nifty 50 by over 30 per cent in 2020. He said that True Beacon Two is a long-only alpha oriented scheme aimed at diminishing the inflationary pressures of the economy while generating superior risk-adjusted returns.

“This will be achieved by leveraging the selective pool of equities within the universe of the largest 200 companies in the Indian economy which we believe will be the industry drivers while mitigating excess market volatility by dynamic asset allocation utilising high-grade tax-free debt instruments,” he added.

He further said that the overall alternative investment fund (AIF) space has been growing as the number of AIFs have been increasing and the money coming into such funds have also gone up exponentially. He believes that there is plenty of appetite for anything related to equity in financial markets.

Richard Pattle, Co-founder and CEO, True Beacon said “as we expand our product-suite of funds to cater for ultra-HNI and HNI, True Beacon Two is a natural progression from our flagship fund. Having demonstrated our equity investment capabilities over the last two years, we are confident that this fund will fit alongside True Beacon One”.

Sharing insights on the strategy, Prashant Bisht, Vice President, Investment and Research, True Beacon mentioned, “to deliver superior risk-adjusted returns, our investment and research team has implemented a robust investment process that scans multiple quantitative and fundamental factors to identify equities and sectors that aim to outperform the broader markets”.

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