Capital market regulator, Securities and Exchange Board of India (SEBI) , told several hedge funds wanting to invest in India, that they should agree to a lock-in period of two years as a cushion against sudden withdrawal under adverse circumstances, reports Economic Times.

SEBI official said that, some hedge funds, both new and existing, have already agreed to the lock-in stipulation.Some of these are already invested in the Indian market through participatory notes (PNs). These funds want to register directly with SEBI and invest with a two-year lock-in, sources said. By definition, hedge funds are pooled funds that invest in several instruments across markets and are organised as private investment partnerships.

SEBI chairman M Damodaran, is in attempts to persuade other new hedge fund applicants to provide a lock-in undertaking. The regulator  wants to ensure that hedge funds registering directly with it, are regulated in the country of their origin. 

The other comfort being sought is whether the fund will agree to a two-year lock in period. Sources said that, those who agree to this will get a preference in entering the Indian stock market. But many feel by its very nature, hedge funds may be averse to accepting such a commitment

In the past, SEBI, considered allowing hedge funds, assuming that they could be an additional source of liquidity, besides diversifying the pool of foreign investments in the local market.
Source : Myiris