Global hedge funds are moving to India, here’s why

20 November 2023 - 13:00

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Hedge funds from all over the world are establishing a presence in India, with some investors thinking it will replace China.

Global hedge funds are moving to India, here's why

Global hedge funds are rushing to establish a presence in India, a market long neglected by foreign investments, both attracted by the growing liquidity.

Singapore-based multi-strategy hedge fund Dymon Asia Capital and Citadel Securities are among the funds and securities brokers that are entering a market where they had a limited presence in the past, concerned about tax issues and their ability to hedge investments through short selling.
Dymon, which currently manages $2 billion in assets, is applying for an investment advisory license and is opening an office in Mumbai.

Traditionally, the main performance drivers in our equity sector have been Greater China and Japan”, said Mark Wong, co-chief executive officer of Dymon. “But over the last 12-24 months, India has increasingly become a significant contributor in terms of returns and risk-taking across the portfolio.”

Some funds highlight India’s economic opportunity, rich local talent pool, and stable regulatory environment, while increasing trading volumes have made it easier to hedge positions or pursue typical long-short equity strategies .
The market capitalization of Indian stocks has doubled in just three years, to $3,8 trillion in September, and this liquidity is allowing India to replace China in global portfolios as investors flee China’s major markets in difficulty.

Prashant Kothari, chief investment officer at Pictet Asset Management, notes that Indian equities have received foreign investment flows of around $6 billion so far this year, accounting for more than half of total net investment in global equities.
Sectors such as energy, defense, technology, and pharmaceutical companies will continue to benefit.

Sachin Kewalramani, portfolio manager and head of fundamental equities in Asia at hedge fund Citadel said the firm is looking to hire more investment professionals and engineers from India for its international equities team.
The market has “all the ingredients to continue to attract substantial investment”.
Citadel Securities, a major global market maker, is also expanding rapidly in India and has a local team of 10 in Gurugram, where it opened last year.

Gao Capital, a Singapore-based multi-strategy hedge fund with around $100 million under management, is setting up a facility to trade in-market derivatives, alongside a four-year local private equity strategy.

Transactions have increased significantly since the pandemic began, so it has become a situation where there is enough volume to support market-neutral quantitative trading which we see as a real opportunity,” said Chauwei Yak, CEO of Gao.

Larger global quantitative funds, such as New York-based Tower Research and Amsterdam-based Optiver, are expanding in India according to industry sources and job postings on LinkedIn.

Dymon’s Wong said the new office in Mumbai will facilitate the work of analysts who will be closer to the companies they follow. However, he also highlighted that India is still “difficult to navigate” due to challenges related to regulatory requirements, taxes, and liquidity.

Original article published on Italy 2023-11-18 06:49:00. Original title: India, la terra promessa degli hedge fund

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