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Kanishk & Harsh Agarwal, Founders
Q&A with Kanishk & Harsh Agarwal – AGacquisitions Group
Khai Nguyen: I’m here with the team at AGacquisitions Group. Thanks for joining us today guys.
Kanishk: Thanks for having us.
KN: You founded AGacquisitions Group in 2013, a hedge fund focused on investing in India. Can you explain your investment strategy and your approach?
Kanishk: AGacquisitions was founded in 2010 as an investment bank, with the aim of understanding various investment classes in India that would eventually lead to the transformation of the AGacquisitions Group in 2013 as a hedge fund. The initial years as an investment bank gave us tremendous insight into the market structure of the Indian investment eco-system. This phase helped us understand the market space, better identify our skill sets, and develop a potent school of thought that would guide our approach towards the Indian markets going forward. Very early during our journey we developed a keen sense of the market structure and observed that the expectations and investment time horizons applied by the foreign institutional investor was mismatched with that of market cycles prevalent in India. The Indian market enjoys a greater degree of cyclicity across economic, business and market cycles, owing to inefficiencies in the market structure. Traditional bottom-up, fundamental approaches that normally work in more developed markets tend to play out over much longer time frames. Sometimes, this requires in excess of 7 to 10 years to effectively play out while investors approach the opportunity with a typical 5 year investment window. This mismatch has often led to inefficient returns on investor capital while exposing the investment to higher degrees of risk. Further, it is important to note that India is a developing economy with a constant flux to fundamental policy that add to the uncertainties associated with the market.
We understood this relationship that exists in the market and chose to target the cyclicity of the Indian markets as a theme. Adopting a discretionary, managed futures strategy that employs a top-down approach to the markets while participating across multiple positional and shorter time frames, we noticed that it is possible to derive a more efficient investment avenue with a lower degree of drawdown risk. By participating in these shorter time frames the program allows investors to insulate themselves from the impact of currency risk. It is worth noting that perennial currency depreciation imposes a very large drag to long term investments into India, somewhere in the order of 6% annualized. In our offering to foreign investors, we plan to participate by trading the dollar-denominated derivative contracts of the Indian equity indices available on the Singapore exchange. Apart from our traditional India strategy, which is accessible to Indian investors right away and to be available to global investors soon, we have recently raised close to $36 million towards our ‘low risk Indo-US cross market strategy’ which will trade the SGXNIFTY contracts in Singapore as well as S&P E-Mini contracts in the United States. The strategy will utilize intra-day market leverage and take advantage of the extended trading duration available due to the time zones of these markets. We are also in the process of developing separately managed programs for investors keen to exploring our various strategies.
KN: Can you tell us about each of your backgrounds and your role in the fund?
Kanishk: Having being born and raised in a business family, I was exposed to business and investing at a very young age which steered my interests in the financial markets during my formative years. Because I started early, I gained experience with global firms such as Ernst & Young and BNP Paribas across various business lines and global locations. This helped me gain insight into the world of investing. Coupled with my entrepreneurial flair, I decided to branch out. I saw the opportunity to create a world class investment company and hedge fund out of India. My role at AGacquisitions is to steer the company into new markets and strategies. I am responsible for overall strategy and business development. I am involved in working alongside the CIO to provide macro viewpoints across the company’s various investment programs.
Harsh: Having being raised in a similar environment as my brother, Kanishk, I took a liking to and demonstrated a keen interest in the financial markets during my childhood. I was one of the younger members of the private banking team at Deutsche Bank in India, where I assisted in overseeing assets of about $75 million. This experience led me to understand various inefficiencies that exist in the Indian markets across asset classes. This eventually helped me hone my school of thought that formed the basis of our core investment belief and strategy. At AGacquisitions, I was instrumental in setting the core principles of the fund and ethos of the company at large. I continue to share the responsibilities of the office of the CIO, assisting in steering the company’s new funds across various markets and geographies. I make sure that the direction of our mandate is in line with the overall vision of the company.
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