Indian hedge fund manager Kalpesh Kinariwala is so sure of his equity strategies in a country that has stumped foreign rivals that he sends a daily e-mail tracker of his performance — including to competitors.
Kinariwala’s Capveda Capital (India) Advisory fund, which he runs from a modest office in a decrepit industrial estate in Mumbai, has returned 11.86% so far this year, outperforming average negative returns of 2% from India-focused foreign hedge funds.
Local hedge funds are eager to show off double-digit returns in the hopes of drawing wealthy Indians and succeeding where overseas players including HSBC Holdings PLC have failed.
Local market knowledge and the lack of foreign currency exposure will favour domestic funds, but it remains to be seen whether Indians would embrace new investment styles in a country that traditionally prefers buying and holding stocks.
“It will be very difficult,” said Samir Arora, founder of Singapore-based Helios Capital, which manages hedge funds focused on India.
“India is a small market, and hedge funds will have to show experience shorting, and they will have to appeal to a high net worth crowd, requiring (costly) distributors,” said Arora, who shut one of his India-focused funds called “Jai Ho”.
Investing approaches such as an equity long-short strategy are still a novelty in India, making it harder for hedge fund managers to attract local wealthy individuals.
Assets under management for overseas hedge funds focused on India have shrunk by 68% from 2007 to $2.1 billion in March, according to data from Eurekahedge.
The data also shows India-focused foreign funds returned 12.3% last year — a period when the rupee was whipsawed by economic worries — well under the 25.7% gain in the broader BSE share index.