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India-focused hedge firms worst hit in Asia
By siliconindia
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Tuesday, 27 January 2009, 23:48 IST |
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Mumbai: The shrinking returns from hedge funds have hit the investors' confidence leading to the shutting down of many Asia focused funds. The India-focused funds were among the worst hit as the combined assets of 70 hedge funds have decreased by two-thirds in 2008.
"Every morning, there is at least one hedge fund shutting down in Asia," Daniel McCormack, equity strategist at Australian financial house Macquarie Capital Securities told Mint. The investors have pulled out around $155 billion in the previous year as an aftermath of industry shrinking by one-fifth to $1.5 trillion. In India, the country-focused funds were among the worst hit in Asia as the combined assets of around 70 hedge funds aimed at India have decreased by at least two-thirds in 2008, reports Mint.
Hedge funds are part of the so-called shadow banking system that exists outside the range of regulatory oversight; they are secretive and do not report fund size (often leveraged several times through debt) and returns to outsiders. Funds like Boyer Allen India Fund and The Children's Investment Fund Foundation (TCI) were shut down in 2008. "Funds remain bearish on India as they expect corporate earnings to remain low, with the huge inventory pile-up in China and demand destruction in the developed world," said Madhav Bhatkuly, former Indian joint venture partner of TCI.