Alpha Alternatives MSAR AIF

IME AIF Rating: 4-star | Open for subscription: Yes | AIF Category: High Yield Debt
  • Strategy: Differentiated proposition for an investor, with risk-return dynamics different from other strategies. ‘Multi-Strategy Absolute Return’ Fund’s focus on commodity arbitrage and market-neutral equity strategies, makes it a unique strategy that has value for investors as an alternative to high-risk debt or absolute return strategies.
  • Investment Team: Mudit Singhania (15+ years in commodity industry) and Prashant Mohanraj’s (20+ years experience in prop trading) have the required experience to effectively run this combination of commodity arbitrage & equity trading strategies
  • Performance: While the strategy age is on the lower end of the spectrum, the performance has been in line with the target IRR of 11.6% CAGR since inception (as of Jun-21) despite a pandemic year in between.
  • Tax-structure: The fund is structured in a manner to pay out a substantial amount of returns in the form of interest (tax based on investor’s tax bracket, which makes it efficient for corporates but not for Ultra-HNI’s), with the balance paid out as profits (taxed at ~35% at the LLP end). Taxes do eat away a substantial part of the higher gross yields, even as post-tax returns are still expected to be higher than debt or arbitrage funds
  • Very high potential risk in extreme market conditions: the exponential leverage impact of options can lead to uncontrolled exposures during substantial market disruptions (or black swan events), and could potentially lead to large losses (in an extreme case, even 100% of capital can be lost). While these are very low probability events (and risk control is supposed to mitigate this risk), this is an inherent feature of any strategy involving options
  • A certain level of allocation may be considered: as an option of trying to boost post-tax returns on debt investments. However, it is important to understand that the risks levels are substantially different from debt (primarily linked to options risk in extreme market conditions), which is why this should not be a substantial part of the overall portfolio


The ‘Multi Strategy Absolute Return’ Fund aims to deliver a Gross IRR of 13-14% translating into 8-9% Net IRR (post-tax, post fee).  

Focussed on two asset classes: Commodities and Equity.

  • Commodities (Agri and Metals): Arbitrage strategy to capture pricing inefficiencies between spot and futures markets (due to maximum permissible limits in a single commodity, a pure commodity focused strategy cannot be efficiently managed in an AIF structure)
  • Equity: active, market non-directional, low-risk strategies (options, special situation etc)


  • Focus on Arbitrage Opportunities: By buying the physical commodity (in demat form), while simultaneously selling the same commodity futures to lock in the spread … On futures expiry, deliver the physical commodity to lock-in the spread


  • Mix of lower-risk equity strategies: While the risk is higher than pure arbitrage, most of these strategies are not market-performance dependent – driving the potential for absolute returns .. The aim is to target a 15-16% p.a. return on these strategies … the core underlying strategies include
    • Option strategies (the core focus): This strategy does have merit, and is commonly used by large finance treasuries to earn higher than debt returns. However, it is important to recognise the role of potential tail risk during black-swan events (in a worst-case, even 100% of capital could be at risk). Also unlike arbitrage, the returns on this strategy are dependent on the traders calls playing out, leading to a higher level of volatility in monthly returns than normal debt funds. 
    • Special Situations: take advantage of certain specific situations, that can lead to open-offers or buybacks at prices higher than CMP’s. These are one-off opportunities that can provide a low-risk trade, though risks of the corporate event falling through or market price risk on shares not accepted on the tenders exist.
    • Arbitrage: the lowest on the risk-return curve ..due to low returns on pure static arbitrage, the focus is to enhance returns by trading around arbitrage spreads.
    • Long-short: This does not seem to be a core focus area of the strategy at this time. 



The fund has been structured as an LLP, which allows for income distributions to take place at 2 levels

  • Interest: upto 8% of interest is payable (as interest on capital contribution to LLP) in months where the LLP makes a profit. This component is taxed in the investors hands, based on the income tax slab of the investor. This makes it more efficient for corporates, while less efficient for Ultra-HNI’s at the top tax bracket
  • Profits: are taxed at ~35% (LLP tax) at the fund level


Boutique AMC: Alpha Alternatives is the first AMC to launch a commodity-focussed multi-asset CAT 3 AIF.

AMC Rating

4 of 5 stars

AMC Pedigree

4 of 5 stars

AMC Size

3 of 5 stars

Team Pedigree

4 of 5 stars

Inv Philosophy

4 of 5 stars


4 of 5 stars