The saga of Indian securities laws regulating offshore derivative instruments (popularly called "participatory notes" or "P-Notes") has just had a new chapter. The Securities Appellate Tribunal ("SAT") has ruled that the Securities and Exchange Board of India ("Sebi") was wrong in insisting that foreign institutional investors ("FIIs") should furnish an undertaking that they have not issued P-Notes to certain select types of persons. While issuance of P-Notes against underlying holding in exchange-traded options and futures was banned by Sebi last year, there can obviously be no legitimate ban on a foreign person issuing P-Notes against holdings in Nifty futures ((Nifty is the National Stock Exchange's flagship index) that are traded on the Singapore Exchange. It would be foolhardy to believe that movements in the Nifty futures in Singapore would be insulated from impacting price movements in Indian securities. Therefore, the ban on derivatives-based P-Notes can become quite meaningless. It is time to take an intense and hard look at the regulatory framework for P-Notes and ask some existential questions.   more »

A Bear Stearns managing director is readying an India-focused multi-strategy fund of hedge funds for launch in July with between $10 million and $20 million in initial assets. Ridaa Murad, who has built India-focused synthetic swaps, corporate finance and equities products for Bear Stearns since 2003, has set up New York-based Veda Asset Management with Bradford Matthews, who owns a broker/dealer in India. The Veda Multi-Strategy India Fund will initially include seven managers, eventually increasing its stable to about a dozen. Most of the managers are based in India, Singapore or Hong Kong, with a few based in the U.S. “Our strategy is to try and be as cycle- and asset class-agnostic as possible, so we’re not just equities and not just single directional,” said Murad. “We have direct lending, debt lending, convertible arbitrage and distressed-debt managers. We also have managers in the futures and options arbitrage space, private equity and real estate, as well as long/short and long-biased managers. Given the market in India, we think the opportunities are not just in one part of the market cycle and the trick to investing in India is buying the sell-off.”   more »

The Blackstone Group announced that Aaron Nieman will be launching Blackstone Altius Advisors, a new event-driven strategy focusing on opportunities in the Asia Pacific region. A global, highly experienced investment team will be headquartered in Hong Kong, with additional professionals based in Tokyo, Mumbai, and New York. Nieman joined Blackstone from S.A.C. Capital Management, where he was a Managing Director in the Canvas Capital Management division. "As Blackstone continues to aggressively seek opportunities within Asia, Aaron and his team will provide additional investment capability that will bolster our presence in the region." said Antony Leung, Chairman of Blackstone Greater China.   more »

With oil prices fast approaching USD130 a barrel and a global food crisis looming, the US Senate Committee on Homeland Security and Governmental Affairs is scrutinising the role of financial speculators in the commodities markets. This week senators have been listening to testimony on how speculative investment by hedge fund managers and others may be contributing to food and energy price inflation. Hedge fund manager Michael Masters, of Atlanta-based Masters Capital Management, argues that commodities prices are being driven up by institutional investors, including pension funds, sovereign wealth funds and university endowments, which are investing in commodity futures based on indices as a hedge against inflation. Once again, hedge funds have been dragged in as an explanation for why certain prices are behaving abnormally. The fact is that speculators have always existed in the commodities trade, and investment from hedge funds - speculative or otherwise - is nothing new.   more »

Blackstone Group, a global private equity player, is set to increase its focus on India. After setting the ball rolling on its corporate private equity and recently starting off its real estate opportunity focus, the company during the past week has set up Blackstone Altius Advisors, an event-driven strategy focusing on opportunities in the Asia Pacific region. According to a statement from Blackstone, a global, highly-experienced investment team will be headquartered in Hong Kong, with additional professionals based in Tokyo, Mumbai and New York for the foray. Estimates indicate that close to $1 billion has already been committed by this player to the Indian market. The statement from Blackstone further added that its Asia business includes its fund of hedge funds and two close-end mutual funds – The India Fund and The Asia Tigers Fund.   more »

At the India’s Investors Forum, delegates will be treated to presentations by well-known and established high-profile speakers from the industry. Delegates will come away with an in depth knowledge of India’s investment industry which would allow them to anticipate challenges, capitalize on regulatory reform, adopt best business practices, and identify new and emerging opportunities in the industry. Additionally, delegates will have the opportunity to network, learn, and share with their peers in the industry. This exclusive 2 day conference must not be missed by delegates who wish to upgrade their knowledge of the industry and to gain an edge over their competitors. Special rebates for INDIA PE subscribers & Hedge Funds India’s readers/patrons to attend the mentioned event when registering with Ms. Kelly Lee. For more information on how to register & exhibit, and special rebates please contact Ms. Kelly Lee Tel No: + 6032723 6798 Email: KellyL@marcusevanskl.com Event link:    more »

In theory, hedge fund investors should not panic when markets plunge. After all, the point of a hedge fund is to deliver returns whatever markets do. Nevertheless, the recent turmoil in Asian stock markets, which has seen shares in Shanghai, for example, halved in value in six months, does seem to have unnerved some investors in Asia-focused funds. The first three months of the year were pretty grim, according to figures from Hedge Fund Research published last week. Total Asian hedge fund assets dropped by 10 per cent to $100.3 billion in the first quarter of 2008 compared with $111.4 billion under management at the end of last year. HFR reported that, despite the weakness, investors continued to allocate capital to Asia, with more than $1 billion of new flows serving to partially offset the performance-based asset decline (compared with $16.5 billion globally). "The reason for these inflows is that a lot of the big hedge fund allocators are finally getting their heads around the idea of Asia as a place to invest," Douglas says.   more »

Crude peaked just shy of $128 per barrel, a record high and more than double the levels seen last May, before retreating slightly later in the day. Wyss said he believes between $10 and $20 in the price of crude is attributable to a bubble created by investors. “The balance of supply and demand shows that prices should go down, but the reality of Middle Eastern politics is that it could go anywhere” toward the end of the year, said David Wyss, chief economist at Standard and Poor’s. “I’ve heard people say $40 and I’ve heard people say $200,” said Wyss, who pegged his own crude estimate at $100 per barrel by the end of 2008. “You have people on both sides of this. Some say this is just a bubble, and you have people who say this is the reality, this is all the oil there is.” The world produces and consumes about 86.6 million barrels, or more than 3.4 billion gallons, of oil on an average day, according to the U.S. Energy Information Administration. The United States takes the biggest gulp, swallowing 20.8 million barrels. China, the next largest consumer, uses 8 million barrels, but that balance is shifting. U.S. and European demand has stabilized recently while China and India have seen near double-digit increases in their demand for the black fossil fuel as their economies expand and more drivers hit the roads. The supply of oil – the remains of prehistoric flora and fauna subjected to intense heat and pressure – has not keep pace.   more »

The first ‘Quant Fund’ launched in India has received a fair amount of response, prompting several others to follow suit. The portfolio of a ‘quant fund’ is based on computer-based quantitative analysis working on a mathematical model, with no human judgement involved. Lotus India Mutual Fund’s ‘Lotus India Agile Fund’ which was launched in November last year as India’s first quant fund, currently manages Rs 230 crore on behalf of around 40,000 investors. “The Agile Fund is our largest equity fund today. Though the NAV has come down due to the correction in the market, the investor’s interest in the fund is intact,” said Rajesh Vijay Shastri , Head of Business Development and Strategic Initiative, Lotus India Mutual Fund.   more »

India is mulling imposing a blanket ban on trading in futures in food commodities, as the government attempts to control surging price inflation. The move has been proposed by India's finance minister Palaniappan Chidambaram who told delegates at the Asian Development Bank's meeting in Madrid yesterday that the country is "facing a very grave crisis on the food front", the Financial Times reports. India already forbids futures trading in wheat and rice, having introduced the move in response to worries over the part hedge funds and financial market traders have played in the recent rises recorded by commodities. Cameron Brandt, global markets analyst at EPFR told Marketwatch: "It's indicative of the fact that there's a real issue here and governments are scrambling to find some kind of solution.   more »