Active Rabbit: AIF That Covers The Best Of Both 'Equity and Derivatives'

Volvin Growth Fund introduces Active Rabbit which is similar to a diversified equity fund, according to the company. It is passive and actively uses derivatives for hedging or booking profits in a volatile market and to generate monthly returns using the covered call strategy. 

Volvin claims it to be India’s first Alternative Investment Fund in Category 3, that uses Volvin Philosophy of Covered Call writing to give the best of both worlds of Equity and Derivatives

The fund is not comfortable investing in high PE technology or high PE FMCG stocks already discounting them for future performance.

Vineet Jainn, Chief Investment Officer, Volvin reveals, "we plan to launch two more funds, Consistent Tortoise and Momentum Leopardat a later date."

Volatility Is Here To Stay

There has been a lot of uncertainty about the future primarily due to the shift of growth from traditional brick-and-mortar businesses to IoT and new-age businesses. 

Clearly, more than 80 per cent of growth in the world is due to these new-age tech companies and the market capitalisations of these companies have ballooned to huge proportions. Ironically, it is these startups which also carry the highest risk of failure. All these coupled with the aftermath of Covid, reckless money printing by all economies rich or poor, astronomical global debt to GDP ratios and rising geopolitical tensions.

Around 12-15 per cent annualised return is a great return from Equity markets over the long term from in Indian perspective. From a universe of around 5000 stocks listed at NSE-BSE, there are around over 190 stocks that also trade in NSE Future and Options Segment.

Volvin Growth Fund – Active Rabbit is similar to a diversified equity fund, which is passive, and actively uses derivatives for hedging or booking profits in a volatile market and to generate monthly returns using the covered call strategy. 

The Fund creates a portfolio similar to a diversified Equity Mutual Fund by investing in 40-60 stocks available on the National Stock Exchange (NSE) Futures and Options (F&O). The screening is done on various parameters of valuation, growth and dividend yield parameters. The fund is not comfortable investing in high PE technology or high PE FMCG stocks already discounting them for future performance. 

The fund uses complex derivatives primarily as an option seller/writer and generates monthly returns by collecting premiums on the options sold. Most of the options sold are on the underlying portfolio helping us to generate returns in any market condition; more so, when the market is stable or not performing. 

Active Management Derivatives are used actively for selling options and also for booking profits in the futures segment when we feel the underlying stock has delivered its targeted returns. Derivatives are also helpful in hedging by buying puts or shorting stock futures, shorting index futures in case of adverse or volatile market conditions.

The Volvin Philosophy

Fundamental investing is the paramount factor for stock selection. At Volvin, the stocks are carefully picked keeping in mind the valuation, growth prospects and dividend yield. They are not comfortable in adding high PE stocks either from FMCG or the new age, ecommerce and fintech sectors. Most of the stocks in the FMCG sectors at 60-80 PE already seem to price for at least the next 3-5 years of future growth. Similarly, the IoT sector seems to be pricing near zero failure rates for all the competing companies.