Dolat Capital – A Pioneer in Absolute Return AIFs

With more than 60 years of experience in the evolving Indian capital markets ecosystem, Dolat Capital has been leveraging state-of-the-art technology to foster innovative financial solutions for its base of savvy investors. Considered one of the market makers for ETFs in India, Dolat is known for being among the leading brokerages and research houses in the country, with an expertise in the cash segment of the markets. Through the unique combination of professional expertise and solution-oriented strategies, Dolat Capital has aced the B2B segment and is a reputed leader in derivative-based investment tactics. The diversified brand offers a spectrum of financial services, from proprietary book and institutional equities to investment banking for NBFCs.

Strategic Imperatives at Dolat

The management team at Dolat Capital strongly believes, “If the net returns are not consistently beating the opportunity cost of the funds by a specific margin, then there is no point taking a risk.” In keeping with this sentiment, the brand offers an Absolute Return AIF, which falls under the third category of Alternative Investment Funds. When considering the risk-return perspective, absolute return funds are further classified into market neutral and non-market neutral categories and the Dolat Absolute Return AIF adheres to both the segments, to boost efficiency. It also focuses on long-short and multi strategy approaches, under the market neutral portion of the portfolio, in an attempt to drive high returns for mature investors.

At Dolat Absolute Return Fund, the non-market neutral strategy involves a 65:35 ratio, wherein directional or non-market neutral funds comprise a majority of the investment corpus and 35% of the funds follow the long-short strategy. The non-market neutral segment also follows two other strategies, including the core market neutral strategy combined with a satellite direction and a tactical offering capable of generating equity-like returns, through an optimal coalition of various techniques.

This unique combination makes the fund suitable for all types of investors because, an investor with a low-risk profile, and a desire for consistent returns, can benefit from market neutral products and enjoy the returns typically offered by short-term debt funds, over a 6 month to 1 year time horizon. Separately, a moderate-risk investor can garner equity-like returns from the non-market neutral products and high risk-appetite investors can avail the advantages of Dolat Absolute Return’s tactical offerings, which target double digit returns.

What are Long-Short Funds?

Long-Short Funds also fall under Category-III AIFs and have been available to investors since 2012. These funds are aimed at combating volatility and generating absolute returns, irrespective of market movements. Accordingly, these funds are known to depict lower volatility than the overall stock market and also indicate a low correlation to other financial assets, making it an excellent option for diversification. When following this strategy, your fund manager will take both long and short positions across market conditions, and this can be across individual stocks, sectors or indices and the net exposure is adjusted in alignment with their investment outlook, which ranges from bullish and bearish to neutral.

Dolat’s Approach to Long-Short Funds

At Dolat Absolute Return Fund, long-short funds comprise one of the major investment strategies, thanks to their stable and positive returns, when compared with Equity Savings funds. The strategy also acts as an excellent option for when the equity markets perform poorly, ensuring that investors need not stick with only the debt market, in times of volatility. Since everything has a cost, playing a very safe game will shorten the returns. Therefore, Dolat Capital prefers to underperform, as long as the returns are not negative for their investors.

Dolat Absolute Return Fund also offers an arbitrage opportunity for investors earning above ₹5 crores, as they can save tax by investing in funds that have an LLP structure. Considering the consistent volatility in the market, an arbitrage fund has the ability to make unprecedented returns, while also reaping rich rewards when the market is sharply down, thus making the Dolat Absolute Return Fund an exceptional choice for mature investors.