Top 5 AIFs of 2023: Aequitas and First Water tops the Category III list

The best Alternative Investment Funds (AIF) Category III performers in 2023 were long-only funds, with some of them giving returns as high as 84 percent. Category III AIFs invest in equities of listed and unlisted companies. They can be open- or close-ended, where minimum tenure of close-ended funds is three years. Three out of the top five AIFs in 2023 were close-ended funds.

Aequitas’ Equity Scheme 1 AIF returned 84.65 percent in 2023, the highest among Category III AIFs. An open-ended long only AIF, it was started in 2019 with a corpus of $6 million and has now grown to $100 million. It has a CAGR of 30.2 percent since inception and boasts of a zero churn rate in its portfolio. The fund originally had 16 stocks in its portfolio and 10 of them turned multibaggers in the period of four years. Some of these multibaggers include Technocraft Industries, APAR Industries, Jindal Saw, Jindal Stainless, and Sanghvi Movers.

The First Water Capital Fund is the second best performing Category III AIF with returns of 56.47 percent in 2023. Key holdings include Uflex and Deccan Cements. Some of the sectors that the fund invested in, in 2023, were steel pipes, infrastructure, PSU's, and power. The investment time frame for the fund is around 5-7 years. The fund invests in a concentrated basket of listed equities using a bottom-up approach with a focus on manufacturing businesses. The fund was started in 2020 and Ricky Kirplani is the chief investment officer at First Water Capital Advisors.

Abakkus Emerging Opportunities Fund -1 is a long only close-ended fund. It is the third best performing Category III AIF, delivering 42.29 percent returns in 2023. The fund has 30-40 companies in its portfolio with a bias towards smallcaps and midcaps. The fund follows a bottoms up approach and goes for the third or fourth big player in the sector, which is available at a discount to the market leader. As of September 30, the top five holdings are Carysil, Anup Engineering, HIL, DCM Shriram Industries, and Dynamic Technologies. The fund holds 5.86 percent in Carysil and 3.85 percent in Anup Engineering, is managed by Sunil Singhania, and has an AUM of Rs 7,999 crore.

Malabar’s Value Fund is a long only close-ended Category III AIF, which gave returns of 48.06 percent in 2023. The top five holdings of the fund are Neuland Laboratories, Xpro India, Aptus Value Housing Finance, Safari Industries, and Vaibhav Global. It holds 12.6 percent, 11.9 percent, 7.6 percent, 7.4 percent, and 5.4 percent in Neuland Laboratories, Xpro India, Aptus Value Housing Finance, Safari Industries, and Vaibhav Global, respectively. Malabar focuses on small to mid-sized businesses that are market leaders, have a sustained competitive advantage, and pricing power. Investment horizon for the company is about 3-5 years. The fund was started in 2016.

Samvitti Capital’s Alpha Fund gave returns of 47.88 percent in 2023. It is an open-ended long-short fund with quarterly redemption and seeks to generate absolute returns by positioning itself on both the long and short side of the markets using various strategies. The fund was started in 2015.