Also called Alternative Investment Funds (AIF) in the country, the scene of the hedge funds in India isn’t very active or bright for that matter. And there are many reasons why.
Foremost, not many people have much of an idea about hedge funds in India. There’s a serious lack of awareness about it. And those who do know, most of them are skeptical.
Another big problem the industry struggles with is strict regulations. Coming under the Category III AIF regulations with SEBI, there are just too many rules that don’t allow the investors with the room to enter and get more ROI. For instance, the income from hedge funds is classified as business income. And business income is taxed heavily. So, you may lose as much as a third of your gains in tax. Also, the minimum corpus for hedge funds in India is INR 20 crore and an individual cannot invest less INR 1 crore in the fund. This is a very high entry barrier that prevents many investors from jumping in the scene.
In fact, only last year, Business Standard published an article on this titled “Why is India trying to kill off the industry of domestic hedge funds?” Give it a read here.
(Courtesy: Acquisition International)
Now, all said, this doesn’t mean hedge funds in India are dying. It sure is getting more popular as an alternative asset management industry, playing a decent avenue for investors for portfolio diversification. Indeed, when compared to the counterparts in the USA, the industry is relatively small and at a nascent stage. However, as the startup ecosystem continues to boom in India (although it has slowed down a bit since 2015-16), hedge funds will continue to get bigger and relevant.
There are several renowned hedge funds in India, including Stead-view Capital, Altimeter Capital, India Capital Pte Ltd,and Tiger Global. But due to the lack of public data, it’s not possible to say which are the biggest hedge funds in India. The information isn’t available online.