India not a big hedge fund region: Eurekahedge

In an interview with ET Now, Farhan A. Mumtaz, analyst, Eurekahedge, talks about the performance of hedge funds in India and global markets. Excerpts: 

How are India hedge funds doing now because year to date until April, they were beating the Sensex. How did they fair in May? 

The trend across the regions, actually not just India, in May was a negative one. So market hedge funds have suffered some losses in May in India as well as in other regions. However, they have outperformed the underlying markets. So at this point, year to date performance is still okay and even the May performance, when compared to markets, can be considered as an outperformance. So going forward, the managers who have adopted some protective positions, will continue to do better than the markets. 

But they are absolute return players. So year to date until May, do you think they are still sitting on positive gains or have they slipped into the negative territory? 

Well, the Eurekahedge Global Hedge Fund Index is up. It is up 0.7-0.75%. In terms of regions, the more developed regions are still in the positive. Asia ex-Japan is negative about -4%, but again, that is because the markets have been quite volatile of late. There have been sharp movements across the markets. You are right that they are absolute return vehicles and they are negative year to date, but compared to the other asset classes, they are doing a good job of protecting capital. 

Is new money coming into India funds? A prominent India hedge fund manager I spoke to expresses concerns on that scope. 

Well, in terms of asset flows, there has been some interest in Asia, especially due to the performance over the last year. Also there have been some startups in Asia and there have been launches in Asia. When talking specifically about India, it is not a very big hedge fund region at the moment, but there have been some launches this year. There have been launches in Singapore, Hong Kong and in India which are focussed on India. So the asset flow has not been negative, but it has not been very positive so far this year. 

What are the cash balances like in India at this point on time? Are managers sitting on more cash because of the volatile investing environment? 

Managers have adopted some protective measures. They are being cautious and the trend right now is to be more flexible in the approach to be positioned for any short term movements which can either go down or to be able to profit from any uptrend which might happen. And yes, there are some funds which have maintained some high cash volumes at this point.