During the past week, almost 15 percent of investors have expressed a specific interest in India-focused funds. When compared with the first week of the second quarter, this percentage is almost double. In a recent article in Hedge Funds India (see, “Hedge Fund Managers Cautious: Focus on China and India,” June 22, 2009), Seppo Leskinen, an investment manager stated
I think the shift of the world's economies has gone to China and India and these BRIC (Brazil, Russia, India and China) economies. They are the new economy superpowers in the economic world.
A study by HedgeFund.net (HFN) seems to support this opinion. HFN found that since the first of the year, India-focused hedge funds have produced average returns of 19.6 percent. The same study also estimated that between late 2005 and September 2008, the total assets allocated to India-focused hedge funds increased from $2.8 billion to almost $14 billion. This increase of close to 500 percent shows that hedge fund investors have been looking for more exposure to India.
Many investors and money managers alike believe India is a great long-term bet and that it will produce outsized returns in future years. For example, a U.S. fund of hedge funds based in the Midwest has been searching for India-focused funds for the past several quarters. The firm believes that India-focused funds provide great opportunities; however, have not been able to find hedge fund managers able to minimize downside risk while still providing all the upside potential. It believes that while India-focused funds have remained relatively undervalued, that is changing with the recent elections that have taken place.
In May the people of India elected the 15th Lok Sabha, which are the representatives of the people. In addition the Prime Minister, Manmohan Singh was also re-elected for this second consecutive five-year term. This is the first time since 1962 that a Prime Minister has been re-elected for a second term and many believe that this shows increasing stability within the Indian government.
The firm is looking for a manager that is not only providing beta but a true market-neutral position as well.
As India continues to become one of the world’s economic powerhouses, BHA anticipates investors will continue to flock to funds able to hedge Indian funds in order to take advantage of the growing opportunities that the country offers.
Disclosure: No Positions
