First Water Capital Fund- Category III AIF

The investment objective of First Water Capital Fund- Category III AIF is to achieve capital appreciation through investing in listed Indian equity shares and money market instruments.

The investment philosophy of First Water Capital Fund- Category III AIF revolves around a long-only strategy characterized by a value-driven and concentrated portfolio approach.

The fund prioritizes the maximization of intrinsic value at a portfolio level rather than solely focusing on the market value of individual holdings. To optimize returns, the fund consistently evaluates the relative risk-reward profiles of each stock and reallocates capital throughout the fund’s lifecycle.

Central to First Water Capital Fund- Category III AIF’s philosophy is the conviction that market values will eventually converge towards intrinsic values over time. The fund typically adopts a preferred investment horizon of approximately 5-7 years, allowing ample time for its investment decisions to unfold and materialize.

While the fund acknowledges the challenge of timing short and medium-term market movements, it recommends a staggered investment approach. Investments are accelerated during market downturns, as this is when the disparity between intrinsic and market values tends to widen, presenting compelling value opportunities.

Lastly, First Water Capital Fund- Category III AIF maintains a focus on India, an economy believed to possess significant growth potential and opportunities for long-term investment.

First Water Capital Fund- Category III AIF’s investment strategy is anchored in identifying companies that offer a blend of value and growth potential. The fund targets companies whose intrinsic value significantly exceeds their current market valuation, with a particular emphasis on those exhibiting strong growth prospects. This growth is often structural rather than cyclical, challenging the prevailing market perceptions.

The fund underscores the importance of patience and resilience in navigating the market’s short-term volatilities. While the market may fluctuate based on sentiment in the near term, First Water Capital Fund believes that steadfast conviction can lead to substantial rewards over the medium to long term.

In portfolio construction, First Water Capital Fund adopts a concentrated approach. Rather than diversifying across a broad range of 30-40 stocks, which may closely mirror index performance, the fund focuses on maintaining a select portfolio of 15-18 stocks. This concentrated stance allows for rigorous monitoring of each company’s fundamentals and amplifies the potential for alpha generation. However, this approach also entails heightened risk, as the performance of individual stocks can significantly impact the portfolio’s overall returns.