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FM hints at opening up markets to hedge funds

The finance ministry appears open to the idea of allowing hedge funds to operate directly in the securities market. An indication to this effect was given by finance minister P Chidambaram on Wednesday on the sidelines of the 32nd annual conference of the International Organisation of Securities Commissions (IOSCO). “If hedge funds wish to come to India, and if Sebi is comfortable in allowing them, then I am sure Sebi can put in place the appropriate regulations under which they can operate,” he said.

Hedge funds are believed to have total global corpus of more than $1 trillion and are active across asset classes.

Regulators in many countries are grappling with the dilemma of whether to allow hedge funds directly in their markets as they often operate under the guise of offshore derivatives instruments like participatory notes (PNs). In India, around 30% of funds invested by foreign institutional investors come through PNs and other routes. FIIs have invested over $52 billion in the Indian market.

M Damodaran, chairman, Sebi, also made a reference to hedge funds in his address at the IOSCO conference, saying: “Those who cannot directly access the Indian market have sought to do so by investing in ODIs issued by registered FIIs. There is also continuing demand to open up Indian markets to hedge funds.”

Source : Financial Express

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