Hedge Funds in India

With the notification of SEBI (Mutual Fund) Regulations 1993, the asset management business under private sector took its root in India. SEBI notified Regulations and Rules governing Portfolio Managers who pursuant to a contract or arrangement with clients, advise clients or undertake the management of portfolio of securities or funds of the client. There is no information about any hedge funds domiciled in India. Further, on account of limited convertibility, offshore hedge funds have yet to offer their products to Indian investors within India.

Recently, RBI through liberalized remittance scheme, allowed resident individuals to remit up to US $ 25,000 per year for any current or capital account transaction. The liberalized scheme will allow Indian individual investors to explore the possibility of investing in offshore financial products. Considering the existing limit being only US $ 25,000 per year, Indian market may not be attractive to hedge fund product marketing. As long as there will be restriction on capital account convertibility, foreign hedge funds, by virtue of their minimum investment limit being $100,000 or higher, do not seem to be excited to access investment from Indian investors in India.

Some hedge funds have invested in offshore derivative instruments (PNs) issued by FIIs against underlying Indian securities. Through this route hedge funds can derive economic benefit of investing in Indian securities without directly entering the Indian market as FIIs or their sub-accounts.

Through recent amendments to the FII Regulations, the regulatory regime has been further strengthened and periodic disclosures regime has been introduced. In the offshore derivative instruments (PNs) against Indian equity, are Rs. 8050 crores which represent about 8% total net equity investments of all FIIs. On the basis of market value, the hedge funds account for about 5% of the market value of the total assets held by the FIIs in India.

In this context, the following approach may be considered for allowing the well-established hedge funds to invest in Indian markets as a registered entity under the SEBI (Foreign Institutional Investors) Regulations, 1995.

List of Hedge Funds in India.

• HFG India Continuum Fund
• Avatar Investment Management
• India Deep Value Fund
• Fair Value Capital
• Indea Capital Pte. Ltd
• India Capital FundSM
• Monsoon Capital Equity Value Fund
• Karma Capital Management, LLC
• Atyant Capital
• Atlantis India Opportunities Fund

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