Economic Times- Indian stocks have emerged as the most attractive bet for hedge funds, the fall guys during the recent subprime crisis, with returns better than that of the Sensex. According to a study of over 7,000 hedge funds across the world, those focused on India have emerged on top in the past five-and-a-half years.
International hedge fund tracking firm HedgeFund.Net (HFN) said in its study, India-focused funds generated an average return of 3.09% during July this year  a month when most of the developed markets moved downward. Besides, in the first seven months of this year, these funds have recorded an average return of 19.6% against a fall of over 22% in Sensex during the same period.
HFN vice-president Peter Laurelli, the author of the report, said the average return of India-focused funds were 53.63% in the one-year period through July, which outpaced 44.74% rise in the Sensex during same period. The report said the outperforming of the local benchmark by India-focused funds is a new development and the scenario has reversed in comparison with the 2005-06 period.
The average returns on Indian funds were 21% and 27.86% in 2005 and 2006, respectively, whereas the Sensex returned 42.33% and 46.7%, respectively, during the corresponding periods. Since 2001, these funds have recorded an annual compound rate of 18.44% against 23.04% for Sensex.
India’s returns lagged other emerging markets through much of 2001-02 due to stock market scams and problems associated with investment scheme of state-owned Unit Trust of India US 64, the report said. According to HFN, the percentage of hedge funds investing in India stood at 3.09%, ahead of Brazil (2.5%) and Eastern Europe (2.97%) focused funds at the end of July. China-focused funds had a higher percentage of 7.45%.
The estimated total assets in India-focused hedge funds stood at $13.97 billion in the second quarter of 2007, representing nearly five-fold increase from the level in third quarter of 2005, the report noted.
