Institutional Investor's Alpha Magazine - October 2007 - (Page 59)

Strategies Investing in India A s executive director of the U.S.-India Institute, Manish Thakur has spent the past five years lobbying for Indian businesses on Capitol Hill. In 2005, with investor interest in the country ramping up, he realized it was the perfect time to launch an Indian hedge fund. Thakur, who previously worked as an investment banker for Merrill Lynch & Co. and SG Cowen, put the idea out to longtime friend Armeane Choksi, president of the Washington-based institute — which educates policymakers and business leaders about the importance of the business relationship between the U.S. and India — and a vice president for human resources development and operations policy at the World Bank, and the pair got started. By July 2006 the Hudson Fairfax Group was up and running, with initial funding of $15 million — from an institutional investor and family — and investment teams in Mumbai and New York. Raising additional ﬁnancing, however, has been a struggle, and the fund is currently hovering around the $20 million mark. Although interest in India is strong and the handful of hedge funds investing in the country have been producing attractive gains, investors are leery of paying the typical 2 percent and 20 percent management and performance fees, respectively, to funds investing in a country where short-selling is forbidden and the markets remain largely undeveloped. “Emerging markets always tend to be more volatile than developed markets,” says Thakur. “India is among the more volatile, and the process of hedging, as well as the rules surrounding it, is still evolving.” to India Passage By Udayan Gupta The strength of India’s markets over the past few years has caught the attention of a small but growing portion of the hedge fund industry, and several ﬁrms have shifted their focus to investing in the country or have established ofﬁces in major cities, such as Mumbai and New Delhi, the nation’s capital. Yet India’s nascent hedge fund industry bears little resemblance to its U.S. and U.K. brethren. With regulators easing Faced with elaborate guidelines for establishing busirestrictions on foreign nesses that can trade Indian stocks, restrictions on how investment in India, much stock foreign ininterest among hedge vestors can buy in any one company, an opaque politifunds — a group already cal system and, of course, the prohibition on shortdrawn to the country’s ing, hedge fund managers investing in India have booming markets and been forced to conduct growth prospects — is business in unique ways. Absent traditional hedging on the rise. tools, and with the majority of the country’s businesses still family owned and operated, fund managers have been extremely reliant on private equity investments to generate alpha. But that could soon change. Aware of hedge funds’ growing interest and investment activities in the country, the Securities and Exchange Board of India recently announced rule changes that would create OCTOBER 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 59

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2007

Institutional Investor's Alpha Magazine - October 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Applied Knowledge The Good Guys: Autism Advocate Interview: Nerves of Steel Cover Story: Ivy League Education Alpha Awards: Top Service Providers: Trying Times Strategies: Passage to India Profile: The Oracle of Irvine Alpha Bytes: Futurama Research Center: Funds of Funds 50 Unhedged: Commentary: Crisis? What Crisis?

Institutional Investor's Alpha Magazine - October 2007

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