Alchemy India Long Term Fund (GIFT City): A Deep Dive into Strategy, Philosophy, and Investor Suitability
Introduction
The Alchemy India Long Term Fund (GIFT City) is a long-only Indian equity fund designed for global and domestic investors seeking to participate in India’s structural growth story through a disciplined, research-driven, and long-term investment approach. Originally launched in 2008 and migrated to GIFT City (IFSC), India in 2023, the fund combines a long operating history with the regulatory and tax efficiencies of India’s international financial hub.
Managed by Alchemy Investment Management LLP (GIFT City), part of the Alchemy Group, the fund emphasizes concentrated, high-conviction investing in publicly listed Indian companies, with the objective of generating long-term absolute returns across market cycles.
Overview of the Fund and Its Structure
The Alchemy India Long Term Fund is structured as an alternative investment fund operating from GIFT City and registered with the International Financial Services Centres Authority (IFSCA). It is benchmark-agnostic, market-cap agnostic, and USD-denominated, making it suitable for international investors looking for focused India exposure.
Key structural highlights include:
- Long-only exposure to Indian equities
- Investments primarily in listed companies, with selective participation in PIPEs and IPOs
- Fortnightly subscriptions and redemptions
- Pass-through tax structure for certain jurisdictions
The fund is not designed as a trading vehicle but rather as a long-term capital compounder aligned with India’s economic growth.
Investment Framework and Strategy
Long-Only, Bottom-Up Equity Strategy
The fund follows a bottom-up stock selection approach, focusing on company fundamentals rather than macro timing or index composition. Portfolio construction is driven by primary research, management interactions, and detailed financial analysis.
Core elements of the strategy include:
- Concentrated portfolio of approximately 20–40 holdings
- Initial position sizes up to 5%, scaled over time
- Maximum single-stock exposure capped at 15%
- Sector exposure capped at 40%
The strategy is deliberately benchmark-agnostic, allowing the portfolio to diverge meaningfully from indices when conviction is high.
Investment Universe and Opportunity Set
The fund is market-cap agnostic, investing across large-cap, mid-cap, and select small-cap companies. While growth businesses form the core of the portfolio, the fund may also invest tactically in:
- Deep value opportunities
- Special situations arising from market dislocations
- High-quality IPOs and PIPE transactions
This flexibility enables the fund to adapt across market cycles without compromising its long-term orientation.
Investment Philosophy
Growth at a Reasonable Price (GARP)
The fund’s philosophy is anchored in Growth at a Reasonable Price, reflecting the belief that India’s long-term economic expansion creates opportunities in companies that can sustainably compound earnings without excessive valuation risk.
Key philosophical pillars include:
- Investing in businesses addressing large and expanding markets
- Preference for companies with scalable models and strong return on capital
- Emphasis on valuation discipline alongside growth potential
Long-Term Ownership Mindset
The fund is not structured for short-term trading. Typical holding periods extend beyond two years, with exits driven by changes in fundamentals, governance concerns, or deteriorating risk-reward dynamics rather than short-term price movements.
Research Process and Portfolio Construction
Idea Generation and Analysis
Investment ideas are generated through a combination of:
- Thematic and macro assessment
- Quantitative screening of a broad stock universe
- Company visits, management meetings, and channel checks
- Continuous interaction with industry experts
Each potential investment undergoes rigorous qualitative and quantitative scrutiny before inclusion in the investment universe.
Disciplined Portfolio Construction
Only companies meeting strict criteria—reasonable valuation, strong growth fundamentals, and quality management—are considered. Once included, holdings are monitored continuously, with regular reviews by the portfolio managers and the investment committee.
Risk Management Framework
Risk management is an integral part of the fund’s operations rather than an overlay. The framework includes:
- Daily and event-based monitoring of company fundamentals
- Ongoing review of price action and relative performance
- Strict adherence to concentration and liquidity limits
- Monthly portfolio attribution and risk reviews
Independent risk teams monitor compliance and mandate adherence, ensuring discipline through market volatility.
Fee Structure and Fund Terms
Management and Performance Fees
The fund offers multiple series with varying fee levels based on investment size. In general:
- Management fees range from approximately 1.0% to 2.5% per annum
- Performance fee is typically 15% over a 6% hurdle rate, subject to a high-water mark
Fees are charged net of expenses and vary by series and investor commitment.
Exit and Subscription Terms
- Subscriptions and redemptions are available on a fortnightly basis
- Exit fees apply on a declining scale for redemptions within the first three years
- Subscription fees may apply, subject to caps disclosed in the fund documents
Minimum Investment and Eligibility Criteria
Minimum Investment
The minimum investment generally starts at USD 150,000, with lower management fees available at higher commitment levels.
Eligible Investors
The fund is suitable for:
- Non-resident Indians (NRIs)
- Foreign portfolio investors (FPIs)
- Global institutional and accredited investors
- Eligible investors from jurisdictions such as the U.S., U.K., and Singapore, subject to local regulations
Investors must meet eligibility requirements outlined in the Private Placement Memorandum and applicable regulations.
Tax Considerations
Tax treatment varies by investor jurisdiction:
- U.S. investors receive K-1/K-3 statements, as the fund is treated as a foreign partnership for U.S. tax purposes
- U.K. investors benefit from the fund’s “Reporting Fund” status, which may result in favorable tax treatment
- GIFT City offers a tax-efficient environment, though individual outcomes depend on investor residency and structure
Investors are advised to consult tax advisors before investing.
Frequently Asked Questions
What is the risk profile of the Alchemy India Long Term Fund?
The fund carries a high-risk profile, consistent with concentrated equity investing in emerging markets. Volatility can be significant in the short to medium term.
How liquid is the investment?
Liquidity is moderate, with fortnightly redemption windows. However, exit fees apply in the early years, and the fund is best suited for long-term capital.
Is the fund benchmarked to an index?
No. The fund is benchmark-agnostic, allowing flexibility to pursue high-conviction ideas without index constraints.
What currency is the fund denominated in?
The fund is USD-denominated, which helps international investors manage currency exposure more effectively.
How are redemptions handled?
Redemptions are processed on designated dealing days, subject to notice periods and applicable exit fees during the lock-in phase.
Is past performance indicative of future results?
No. While the fund has demonstrated long-term outperformance historically, past performance does not guarantee future returns.
Who Should Consider Investing in This Fund?
The Alchemy India Long Term Fund is best suited for investors who:
- Have a long-term investment horizon (5–7 years or more)
- Seek concentrated exposure to Indian equities
- Are comfortable with interim volatility
- Value fundamental research and disciplined risk management
- Prefer active, benchmark-agnostic strategies
It is not appropriate for investors with short-term liquidity needs or low risk tolerance.
Recommended Investment Horizon and Conclusion
The recommended investment horizon for the Alchemy India Long Term Fund (GIFT City) is long term, ideally spanning multiple market cycles. The fund’s philosophy, portfolio construction, and fee structure are all aligned with patient capital seeking to compound wealth through India’s economic growth.
In summary, this fund represents a compelling option for sophisticated investors looking for a high-conviction, research-driven approach to Indian equities within a globally competitive regulatory framework.
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