CAPITALMIND SELECT INDIA ONE

What Is Capitalmind Select India One?

Capitalmind Select India One is a Category III Alternative Investment Fund (AIF) designed around a quantitative, multi-factor equity investment strategy.

The strategy combines three established equity factors:

• Momentum
• Low volatility
• Quality

Rather than relying primarily on discretionary stock-picking, the strategy uses systematic and rules-based methods to identify companies displaying characteristics associated with these factors.

The fund invests in listed equity and equity-related instruments and follows a long-bias approach. Its objective is long-term wealth appreciation through systematic exposure to equity markets.

The fund was launched in November 2023, has an open-ended structure and has a stated minimum investment of ₹1 crore. The stated investment horizon is at least three years, while investors should evaluate the strategy against their own risk tolerance and liquidity requirements.

Investors looking for broader exposure to Category III AIFs can also explore ALTPORT's guide to Category III AIF.

Capitalmind Select India One Snapshot

Data points above are based on available fund disclosures and should be verified against the latest applicable documents before investment.

Momentum, Low Volatility and Quality: The Three Factors Explained

The central idea behind Capitalmind Select India One is that different investment factors can behave differently across market cycles.

Momentum

The momentum factor focuses on stocks demonstrating relatively strong price trends. The underlying premise is that securities exhibiting persistent strength can continue to display that strength for periods of time.

Momentum can perform strongly during sustained trends, but it can also experience sharp reversals when market leadership changes.

Low Volatility

The low-volatility factor seeks companies whose share prices have historically exhibited comparatively lower volatility.

The objective isn't to eliminate equity risk. Instead, the factor seeks to alter the risk characteristics of the equity portfolio by favouring securities with relatively lower historical volatility.

Quality

The quality factor focuses on businesses displaying stronger underlying characteristics. Depending on the quantitative framework, quality can incorporate measures relating to profitability, financial strength and business fundamentals.

The attraction of combining quality with momentum and low volatility is that the portfolio does not depend on a single factor working continuously.

Capitalmind describes the three factors as having different performance cycles. A multi-factor approach attempts to combine them so that dependence on any one factor is moderated across different market environments.

How Does the Multi-Factor Approach Work?

A single-factor portfolio can become highly dependent on a particular market regime.

For example, momentum may perform strongly when market leadership persists but struggle when leadership reverses suddenly. Low volatility can behave differently, while quality can become more important when investors place greater emphasis on earnings and balance-sheet strength.

Capitalmind Select India One uses a sleeving/mixing approach, allowing different factor strategies to be combined within the broader portfolio.

The process is rules-based rather than dependent solely on subjective market calls. The portfolio is designed to be agnostic across market capitalisation, sectors and investment styles rather than concentrating its exposure in a narrow market segment.

The strategy also follows monthly rebalancing, allowing portfolio exposure to be systematically updated as factor characteristics change.

This is an important distinction from a conventional discretionary equity portfolio. The objective is not simply to find a manager with strong stock-picking conviction; it is to create a repeatable framework for identifying and combining measurable investment characteristics.

How Systematic Hedging Works

A quantitative AIF can use systematic rules to manage portfolio exposure when market conditions change.

For a long-bias strategy, systematic hedging does not necessarily mean permanently protecting the portfolio against every market decline. Instead, hedging can be implemented through predefined rules and instruments to modify net market exposure.

The potential benefit is that the portfolio can respond to changing market conditions without requiring every decision to be made through discretionary market calls.

However, hedging has a cost.

When markets rise strongly and the portfolio carries defensive or hedged exposure, the strategy can participate less fully in the upside. Similarly, a hedge can become less effective when markets reverse rapidly.

Therefore, systematic hedging should be viewed as a portfolio-management mechanism rather than a guarantee against losses.

Investors comparing this approach with traditional long-only equity strategies should understand that the presence of hedging can change both the return pattern and the risk profile.

Where relevant, investors can also understand the broader distinction between long-short strategies and long-bias approaches.

Capitalmind's Quantitative Investment Process

Capitalmind Select India One is built around data-driven and systematic investment rules.

This approach is intended to reduce dependence on subjective decisions and make the portfolio-construction process more repeatable.

The fund's stated approach includes:

• Identifying systematic and repeatable drivers of equity returns
• Screening stocks using momentum, low-volatility and quality characteristics
• Combining multiple factor exposures
• Maintaining diversification across sectors, market sizes and styles
• Rebalancing the portfolio periodically
• Using rules-based portfolio construction rather than relying solely on discretionary calls

The strategy is therefore better understood as a quantitative multi-factor equity strategy rather than a traditional concentrated stock-picking fund.

That distinction matters because factor strategies can go through periods of both strong and weak relative performance. The objective is to maintain discipline through those cycles rather than continuously changing the framework based on short-term market sentiment.

Capitalmind Select India One's Fund Structure

Capitalmind Select India One operates through a trust-and-scheme structure.

The AIF is constituted as a scheme of the Capitalmind Select India One Trust. Axis Trustee Services Limited acts as the trustee, while Capitalmind Financial Services Private Limited serves as the investment manager.

Capitalmind Technology Solutions Private Limited acts as the settlor and sponsor. The sponsor made an initial capital commitment of ₹10 crore to the AIF.

This sponsor commitment is relevant from an alignment perspective because it means the sponsor has capital committed to the fund alongside external investors. It should not, however, be interpreted as a guarantee of performance or protection against investment losses.

The AIF's SEBI registration number is IN/AIF3/23-24/1357.

Capitalmind Select India One Minimum Investment and Fees

The stated minimum investment for Capitalmind Select India One is ₹1 crore.

As a Category III AIF, the fund is intended for investors who understand the characteristics and risks associated with alternative investment products, including market risk, liquidity considerations, derivatives exposure where applicable and the taxation applicable to the structure.

The applicable management fee, performance fee, hurdle, exit provisions, redemption terms and other commercial terms should be reviewed in the fund's latest Private Placement Memorandum (PPM) and subscription documentation before investing.

Investors should not rely on a generic fee structure across Capitalmind products because PMS and AIF strategies can have materially different commercial terms.

For a broader understanding of AIF structures and investment considerations, investors can explore ALTPORT's Alternative Investment Funds in India resource.

Taxation and Category III AIF Considerations

Taxation is an important consideration when evaluating a Category III AIF.

Unlike Category I and Category II AIFs, Category III AIFs generally do not receive the same pass-through treatment for all income under the tax framework applicable to other AIF categories.

The actual tax treatment can depend on the nature of income, the fund structure, the investor's status and prevailing tax regulations.

Investors should therefore evaluate the tax implications before investing rather than comparing the headline returns of a Category III AIF directly with those of a PMS or mutual fund.

For a category-by-category overview, see ALTPORT's guide to AIF taxation by category.

Key Risks of a Multi-Factor AIF

Capitalmind Select India One is an equity-oriented Category III AIF and carries a very high risk profile. The strategy's systematic nature does not eliminate market risk.

Factor-cycle risk

Momentum, quality and low volatility can perform differently across market cycles. A factor that worked strongly in one environment may lag in another.

Model risk

The investment process depends on quantitative models and rules. If assumptions, signals or portfolio-construction methodologies fail to capture changing market behaviour, performance can be affected.

Momentum reversal risk

Momentum strategies can experience sharp losses when prevailing trends reverse quickly.

Hedging cost

Systematic hedging can reduce downside exposure in some circumstances but may also reduce participation during strong market rallies.

Concentration risk

Although the framework is diversified across factors, sectors and market characteristics, equity portfolios can still experience meaningful concentration in particular securities or factor exposures.

Liquidity risk

AIF units and underlying investments may not provide the same liquidity as listed mutual fund units. Investors should understand redemption terms and the fund's liquidity provisions.

Derivatives and leverage risk

Where derivatives or other instruments are used, losses can be amplified depending on the structure and exposure.

Tax risk

The tax treatment of Category III AIF income can materially affect post-tax returns.

Short track-record risk

Investors should distinguish between live fund performance and historical factor research or backtested strategies. Backtested results do not guarantee future outcomes.

Who May Consider Capitalmind Select India One?

Capitalmind Select India One may be relevant for investors who:

• Can commit at least ₹1 crore
• Understand Category III AIF structures
• Have a long-term investment horizon
• Are comfortable with quantitative and rules-based investing
• Understand that factor performance can be cyclical
• Can tolerate periods of underperformance
• Are comfortable with the liquidity and taxation characteristics of an AIF
• Want diversified exposure to momentum, low volatility and quality factors within a single strategy

It may be less suitable for investors seeking guaranteed returns, capital protection, daily liquidity or a strategy based entirely on discretionary stock-picking.

Investors considering an AIF specifically for non-resident portfolios can also review ALTPORT's AIF for NRI investors resource.

Explore Related Investment Strategies

Investors researching Capitalmind Select India One may also want to compare it with other quantitative and alternative strategies available through ALTPORT:

• long-only equity strategies
• long-short strategies
• Alternative Investment Funds in India
• AIF taxation by category
• AIF for NRI investors

For further information, investors can contact our investment team.