Institutional Investor's Alpha Magazine - October 2007 - (Page 61)

in Indian companies through participatory notes — instruments that allow brokers to execute trades on hedge funds’ behalf, keeping the funds’ identities anonymous. Hedge fund managers have also been circumventing India’s strict regulations by setting up portfolio management schemes. Less heavily regulated, these are basically customized Indian mutual funds used by individuals and private sector insurance companies to manage funds for high-net-worth investors. In the past few years, fund managers such as Ron Shah, founder of New York–based Jina Ventures, have set up portfolio management schemes in India with plans to gradually broaden their investor bases to institutional investors and morph their portfolios into full-ﬂedged hedge funds. “India is not conducive to real hedging,” says Shah. In 2002, following a stint at New York–based private equity ﬁrm Resurgence Capital, he ventured out on his own with the intention of setting up an advisory shop for merger and acquisition bankers to gain a foothold in India. H&M Global Selection, a Japanese family office that was looking to replicate its success in the Chinese stock market by moving into India, contacted him and agreed to help ﬁnance Jina. One of Jina’s early investments, made in 2005, was in Pune-based Uma Precision, a family-owned manufacturer of precision systems and parts for the auto industry that boasted annual sales of $12.7 million. Since making the in- vestment, Jina’s bankers have worked with the company to attract outside investors and expand product lines, helping boost its annual sales to $27 million in 2006. Family-owned businesses like Uma are common in India, and even many publicly listed companies remain family controlled. Roughly half of India’s top 100 companies are family owned or controlled, generating approximately $50 billion of the top 100’s $154 billion in revenues, according to Boston-based private equity ﬁrm Bain Capital. On top of that, India’s financial disclosure requirements are minimal. Not surprisingly, the country’s hedge funds are aggressive private equity investors. Large banks and investment ﬁrms are getting into the game as well. In 2004, France’s Société Générale Asset Management acquired a 37 percent stake in SBI Funds Management, a subsidiary of the State Bank of India and the country’s largest asset manager, with more than $6 billion in assets under management — including hedge funds. ABN Amro Asset Management and private equity firms Blackstone Group and Carlyle Group are also operating in India through local partnerships, while other major hedge funds continue to invest through non-India-speciﬁc funds. “It’s a market where you can generate private equity–like returns without the risks and illiquidity of private equity,” says Monsoon Capital’s Prakash. “Taking a private equity 3:37 PM http://KNIGHT.COM

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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