Managing Indian Investors

By Venu Vallabhaneni, (Managing Partner at CapitalAlphabet)

Friends and relatives residing in India ask me about ways to invest in our fund. Reserve Bank of India(RBI) streamlined this process very well.

Indian citizens residing in India are allowed to invest up to $250,000 every year overseas. So a family of 4 can invest up to $1 million overseas in a given year. Refer this RBI notification for more details As per Liberalized Remittance Scheme(LRS), The limit of $250,000 per Financial Year (FY) also includes or subsumes remittances for current account transactions (viz. private visit; gift/donation; going abroad on employment; emigration; maintenance of relatives abroad; business trip; medical treatment abroad; studies abroad) available to resident individuals under Foreign Exchange Management (Current Account Transactions) Amendment Rules, 2015 dated May 26, 2015. Release of foreign exchange exceeding $250,000 requires prior permission from the RBI. So, Any person with future needs for kids education, visits, maintenance , gifts or any other needs abroad its better to build nest eggs in USD now instead of scrambling later as there is a yearly limit.

Indian markets offer plenty of compounding opportunities but it is not a bad idea for Indian investors to diversify at least some portion of their assets allocated to other geographies mainly to have some exposure to greenback’s. In last decade USD appreciated significantly in comparison to Indian rupee that’s a huge tailwind if you invested in assets underlying USD. While investing in global securities, my baseline is always finding the best possible opportunity in US , add discounts based on geography, political and currency by risking investing capital outside, if its still beats my opportunity cost in US then I invest outside US, I actively look for US opportunities that beat my global allocations and always ready to swap-in US opportunity, as its our gold standard on all aspects of investing.It’s fun to sail with sails up in a huge tailwind!

Opening an account with CapitalAlphabet is straightforward, A separately managed account(SMA) is opened in your name with a reputed brokerage Interactive Brokers(IB), You need to fund IB account in USD and CapitalAlphabet will only have trading permissions on your account and IB takes care of brokerage activities, Its like having your private fund and the portfolio is managed for you alone.Please send an email to capitalalphamgmt@gmail.com with your interest and we will share our documents, after completing them, you will receive an email that contains a link to open an account at Interactive Brokers.

Our fund base currency is USD, fee structure is zero management fee, only charges performance allocation in amount equal to 25% of net annual profits above a 6% "Hurdle Rate” , and only to the extent that such appreciation causes the net asset value to exceed its high-water mark, i.e Zero fee until a 6% annual return is delivered to investors. The high-water mark will be the highest value of clients account within the past 1o year's year-end high, after accounting for for the client’s deposits or withdrawals for each billing periods. For example on 10% return, fee is 1% and 9% net investor’s return. If fund looses money or makes less than 6% then there is no fee till investors get back above high-water mark. We only make money, when client makes money above 6% yearly on USD, a USD denomination is a tailwind for Indian investors counting returns in rupees.

All our investment accounts are held directly in the client's name(i.e. separately managed accounts(SMAs) for clients on a discretionary basis), and it allows our clients full real-time transparency into their investments, customizable reporting and greater control of their hard-earned assets. We don't believe in placing legal restrictions like lockup's etc on our clients. Mutual trust & alignment with our clients is the foundation of CapitalAlphabet.