India Hedge Funds Soar On Modi Expectations

Aug 27 2014 | 5:48am ET

India-focused hedge funds have been the best in the world this year, buoyed by excitement about the reforms expected from new Prime Minister Narendra Modi.

Indian hedge funds are up 26% through July, according to Eurekahedge—an impressive result, given the generally anemic returns posted by hedge funds around the world. The average Asian hedge funds, for example, have returned only 3.5% this year.

India-focused hedge funds are only a tiny fraction of the global industry, with less than $3 billion. But investors may be attracted by the big returns posted in the wake of Modi’s impressive electoral victory in May.

According to Eurekahedge, the India Insight Value Fund is the region’s best-performing vehicle, up 78%. The Mayur Hedge Fund is up 49% and the Malabar India Fund 48.6%.

“Times have changed and we have Modi, the hero,” Samir Arora, head of Singapore-based Helios Capital Management, told Bloomberg News. “We have seen a massive change in interest. Next year can be very big for India.”

Helios is up 36% this year.

By contrast, Europe-focused hedge funds have disappointed. Such funds returned an average of just 2.1% in the first half, less than one-third the return of the STOXX Europe 600 Index, according to Cerulli Associates.

“Hedge funds last outperformed European stocks in 2008, when hedge funds fell 17.4% as measured by the Eurekahedge European Hedge Fund Index, and the STOXX Europe 600 slumped 43%,” Cerulli’s Barbara Wall said. “Since then, they’ve been battling government intervention, pressure from regulators, record low interest rates, and a fall in volatility, which have hampered managers’ ability to deliver.”

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