AVENDUS EQUITY STRATEGY TRUST

Fund Philosophy: Avendus Equity Strategy Trust

The investment philosophy of the Avendus Equity Strategy Trust is rooted in the “Game of Moats” framework, a proprietary research methodology designed to identify companies with durable competitive advantages. As a Category III AIF, the fund focuses on generating absolute returns through a blend of fundamental business analysis and sophisticated risk management.

• The “Game of Moats” Framework: The core tenet of the fund is that long-term wealth is created by businesses that can protect their profit margins against competition. The philosophy categorizes “Moats” into several distinct types, including intangible assets (brands/patents), switching costs, network effects, and cost leadership.

• Quality at the Core: The fund prioritizes businesses that exhibit high Return on Capital Employed (ROCE) and consistent free cash flow generation. The philosophy shuns “value traps”—companies that are cheap but lack a catalyst for growth. Instead, it seeks out “Compounders”—high-quality companies that can reinvest their earnings at high rates of return over multiple market cycles.

• Dynamic Hedging and Volatility Management: Unlike traditional “long-only” mutual funds, this strategy utilizes an active hedging overlay. The philosophy acknowledges that Indian markets are prone to periodic systemic shocks. By using equity derivatives, the fund aims to limit drawdowns and de-risk the portfolio’s “Beta,” isolating the manager’s stock-picking skill (Alpha) to provide a smoother return profile.

• Sector-Agnostic, Thematic Allocation: While the fund is primarily bottom-up, it applies a top-down thematic overlay to ensure it is positioned in the right sectors. The philosophy focuses on structural themes such as the financialization of savings, digital transformation, and the rise of premium consumption in India, allowing the fund to stay concentrated in high-conviction ideas while maintaining the flexibility to pivot as cycles shift.