It is no secret that emerging markets hedge funds, specifically those focused on India, fell from their apex last year and took a beating along with the rest of the industry. Funds of all strategies and sizes dropped between 28% and 88% during the course of the year.
However, hedge fund managers who lived through the carnage of 2008 say that there are brighter days ahead in India for those investors willing to ride out the storm.
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Ridaa Murad, co-founder of the Veda Multi-Strategy India Fund, a fund of hedge funds which launched in September, said managers who suffered the most last year were the ones with the large side pocket investments because, “when the liquidity crunch came, they were in no position to do anything with those (side pockets).”
Real estate was also a tough space to be in; and quite a few funds with either direct exposure to land acquisitions or to publicly-listed companies also suffered drawdowns, according to Murad. Another strategy that fared poorly was private equity in the public markets (ie having long-term investments in public companies), which worked really well in 2007 but was hammered because holdings that were not listed on the index and could not be hedged, were sold without any regard for valuations.
