India focused hedge funds have posted spectacular returns in 2014 against the backdrop of rising domestic equity markets, and a renewed sense of confidence in the Indian economy which is being led by Narendra Modi. Hedge funds investing with an Indian mandate have topped the performance tables in 2014 and in this special section of The Eurekahedge Report, we ask some of the top performing Indian hedge fund managers about their winning themes during the year, in addition to investor allocation activity and the key macroeconomic themes which they will be watching out for in 2015.
In 2014, the average Indian hedge fund was up 39.36%, outperforming underlying markets by almost 10%. Managers running long/short equity strategies emerged as the clear winner posting gains of 54.83% - their best performance in the last eight years. Figure 1 below details the historical performance of Indian managers relative to the BSE Sensex Index and shows how managers focused on the country have rebounded after a relative lull over the preceding four years.
Figure 1: Historical performance of Indian hedge funds
In terms of asset growth, Indian hedge fund assets under management (AUM) are currently at a seven year high of US$3.45 billion, though roughly 36% below their 2007 peak of US$5.36 billion. The average Indian hedge fund was down 50.66% during the 2008 financial crisis, witnessing steep performance-based losses and investor redemptions from which the Indian hedge fund industry is yet to recover.
Since 2009, Indian managers have posted an eight year annualised return of 10.89%, and barring 2011, their AUM continues to trend upwards albeit at slower pace compared to the broader Asian hedge fund space.
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