Kotak launches infrastructure fund in Europe

Kotak Mahindra (UK) has launched its first infrastructure focused fund available to European retail investors.

Set to be launched this month, the India Infrastructure and Realty fund will be a Ucits III compliant Sicav with a minimum investment of US$500 (£299) required.

The fund will primarily invest in listed shares and equity linked instruments of companies directly or indirectly linked to the Indian infrastructure and realty sectors.

The new fund will be a Sicav version of the existing Kotak Indian Infrastructure and Realty fund, which was launched in November 2007.

The India Infrastructure and Realty fund will be the second Sicav fund that Kotak has launched.

Nitin Jain, principal fund manager for Kotak's long-only strategies, will manage the fund.

Mr. Jain also manages Kotak's other Ucits III compliant Sicav, the Indian Multicap fund, and has nearly 14 years of experience in India's equity markets.

The fund, domiciled in Luxembourg, is targetted to have a size of US$100m (£60m) by the end of 2009.

Paul Parambi, head of international business at Kotak Mahindra, said: "We are launching this fund in response to significant investor demand for a product, which focuses solely on the Indian infrastructure sector and that is easy to invest in.

European investors are attracted to this asset class, which includes roads, power, highways, airports, ports and railways; because it has long-term growth potential and can provide relatively stable returns.

India currently has an underdeveloped and undercapitalised infrastructure set-up that requires significant investment to accelerate growth.

The government has identified this need and is actively encouraging private investment in the sector.

"Private equity funds have already invested close to $2.7bn (£1.6bn) in the country's infrastructure sector in the past three years and as more private players enter the arena the sector will evolve further and create attractive investment and exit opportunities."

However, Kotak added that investments in India are subject to the normal risks associated with emerging markets, including but not limited to risk of losing some or all of the capital invested, high volatility, variable liquidity, geopolitical risks including political instability, exchange rate fluctuations and restrictions on foreign investors.

Investments in India should, therefore, be considered only as part of a well diversified portfolio, according to Kotak.