Indian fund managers line up long-short equity funds for wealthy
The new category of investment funds were first announced last year as a way to offer sophisticated investors a wider range of options.
Under the new rules, which kicked in on April 1, Indian mutual funds can now offer long-short equity funds - where fund managers take both long- and short-positions - under a new category called "Specialised Investment Fund" (SIF) with a minimum investment size of 1 million rupees ($11,663.51).
ICICI Prudential Mutual Fund, Quant Mutual Fund, SBI Mutual fund and ITI Mutual Fund are already approved to launch the product, according to public disclosures and spokespeople of these firms.
The CEOs of Edelweiss Mutual Fund and Mirae Asset Investment Managers, a unit of South Korea's Mirae Asset Financial Group, are awaiting approval to launch a hybrid long-short fund and an equity long-short fund respectively, they confirmed to Reuters. Nippon India mutual fund is awaiting approval to launch a long-short fund.
"We see a lot of potential in this category similar to what we have seen in alternative investment funds who have been able to amass assets with these long-short strategies," said Jatinder Pal Singh, CEO of ITI Mutual Fund.
India's 48 asset managers manage 72.20 trillion rupees in assets.
Hedge funds and quant firms such as AlphaGrep Investment Management, Abakkus Asset Management, Carnelian Capital, and Ask Investment Managers have applied for mutual fund licences, a prerequisite for launching SIFs, executives at these firms said, declining to be named.
The funds did not respond to Reuters emails seeking details.
SIFs allow fund managers more independence to structure their funds, said Ashish Gupta, chief investment officer at Axis Mutual Fund, also awaiting regulatory approval to launch SIFs.
These funds are also permitted to trade derivatives and could help increase institutional participation in the derivatives market, where the regulator is seeking to widen the investor base and reduce speculation.
"Potentially this could help in reducing the speculative nature of options trading but would depend on strategies being rolled out and how much assets they get," Gupta said.
Global trading firms have increased their presence in India's growing derivatives market in the last year, but institutional participation from Indian funds is limited.
Proprietary traders made up 52.3% of total derivatives traders as of April, with retail at 33.6%, while domestic institutions - which include mutual funds - made up only 0.2% of total derivative traders, NSE data showed.
($1 = 85.5450 Indian rupees)
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