Like many other emerging markets, India has been benefiting from significant foreign fund flows in recent years as investors’ quest for yield and increasing risk appetite has led them to look farther afield from their home markets. Hedge funds have been a less significant and undoubtedly somewhat nascent conduit thus far. However, a combination of several factors, including continued economic strength at the macro level, increasing visibility and interest from investors and favourable developments from a regulatory standpoint, have arguably positioned hedge funds to become a far more influential and integral force in the market in the future. The Indian equity market has several features that create an ideal playing field for hedge funds. The market comprises over 5,000 listed companies, providing an extremely broad universe of potential opportunities. At the same time, institutional ownership and research coverage is quite thin and limited to a handful of large-cap names, providing a real opportunity for hedge funds to bring its sourcing abilities and depth of research to bear on an investment. While the current investment climate in India is undoubtedly favourable for all equity managers, hedge funds are arguably best positioned to exploit the opportunity. This can be ascribed to several factors, including the ability to invest across a wider cross-section of the investment universe (given their typically smaller size), the latitude afforded to run more concentrated portfolios (since they are typically not measuring themselves against a benchmark) and the flexibility to use tools to gain short exposure (single stock, single stock futures and index futures).   more »