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Big European Hedge Fund Sets Up to Invest in India

Date: Wednesday, August 26, 2009
Author: David Walker, The Wall Street Journal

Europe's largest hedge-fund manager has set up two Mauritius-based vehicles as a way for its flagship global-macro fund to invest in India, underscoring the growing interest in the region.

London-based Brevan Howard Asset Management LLP, which manages $24 billion, said in a stock-exchange filing late last week that it had created two funds in Mauritius to hold Indian investments for its flagship Brevan Howard Master Fund. That $15 billion fund pursues a freewheeling global macro strategy, investing in instruments its managers expect to be influenced by global economic themes. A spokesman said Mauritius funds are a standard way to invest in India for those who want to keep assets offshore.

India, along with China, has been at the heart of one such theme: rapid growth of manufacturing and increasing wealth and consumption by the middle class.

It wasn't clear whether the Master Fund or Brevan Howard's Emerging Market Strategies fund already invests in India. A spokesman declined to comment.

In the filing, the flagship portfolio's directors said they don't expect the Indian investments to be large.

Hedge funds that target Asia excluding Japan rallied 27% in the first seven months of this year, making them the second-best performing subset of emerging-markets funds after Latin America, according to data provider Hedge Fund Research.

Their performance was due in no small part to the 62% surge in the Bombay Stock Exchange's Sensitive Index over the same period, following a 52% plunge last year. Hedge funds on average lost 33% last year.

Bill Maldonado, head of hedge-fund manager Halbis Alternatives, part of HSBC Holdings PLC, said most India-focused hedge funds don't bet on shares falling -- a hallmark of hedge funds. Most of the money they borrow on top of what investors provide goes on bets that the market will rise. "Most Indian hedge funds have been leveraged long-only funds," he said.

Halbis's Indian hedge fund, managed by Sanjiv Duggal since its launch in 2007, made 33.6% in the first seven months of this year, after losing 26% last year.

Charlie Cantlie, director at FMG, which invests in emerging-market hedge funds, said hedge funds focused on India had a disappointing performance last year. "We were very disappointed with the majority of hedge fund managers, who got it wrong last year," he said.

Write to David Walker at david.walker@dowjones.com