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Hedge funds investing in India have become the world's best performers this year on expectations that Prime Minister Narendra Modi will revive Asia's third- largest economy.
The funds investing in the South Asian nation have returned 26 per cent this year through July, according to Eurekahedge Pte. That compares with an average 3.5 per cent gain for those investing in Asia, 1.9 per cent for Greater China, 1.2 per cent for Japan, 3.8 per cent for North America and 1.1 per cent for Europe, the Singapore-based data provider said.
India-focused hedge funds, with a sixth of the $16.5 billion in assets of those investing in Japan, are set for the strongest return in five years after Modi secured the nation's largest election victory since 1984 in May. The prime minister has pledged to restore economic growth, rein in inflation and the budget deficit, as well as revive stalled projects to boost investor confidence.
"Times have changed and we have Modi, the hero," said Samir Arora, Singapore-based founder of hedge-fund firm Helios Capital Management Pte. "We have seen a massive change in interest. Next year can be very big for India." Helios Strategic Fund, which bets on rising and falling stock prices, has returned 36 percent this year through the end of July. Arora declined to disclose the assets for the fund that started in 2005.
Best performers
The best-performing hedge fund investing in India in 2014 is the India Insight Value Fund, which returned 78 per cent until the end July, according to data compiled by Eurekahedge. It is followed by The Mayur Hedge Fund, which gained 49 per cent, and the Malabar India Fund LP, which added 48.6 per cent.
Assets under management of India-mandated hedge funds rose almost sevenfold to $5.3 billion during the three years through the end of 2007 and slumped to $2.3 billion in the following two years, according to Eurekahedge. They have rebounded to $2.8 billion as of the end of July. That compares to $16.5 billion in Japan and $1.4 trillion in North America.
Forefront Capital Management Pvt., which was founded in 2009 and bought by Indian service provider Edelweiss Financial Services Ltd. this year, has seen rising inflows, said Radhika Gupta, co-founder and business head at the Mumbai-based firm.
"In this year's first half, inflows haven been significantly higher than during the full last year," said Gupta, declining to elaborate further. "We have seen the first wave of new funds on anticipation of Modi's reforms, and we will see a second one on execution."
