Wednesday 27 February 2008

World`s largest hedge fund firm now in India

Renaissance Technologies, the world’s largest hedge fund firm handling assets worth $35.4 billion (Rs 1,41,600 crore), has received approval from the Securities and Exchange Board of India (Sebi) to operate in the Indian stock markets as a foreign institutional investor.

Renaissance is the latest — and the biggest — among several hedge fund players that entered India following a liberal approach taken by the Indian regulator on hedge fund participation in the booming Indian stock market.

Others that recently entered include Vikram Pandit-founded Old Lane, DE Shaw (the world’s fifth-largest hedge fund with $29 billion or Rs 1,16,000 crore worth assets) and Och-Ziff Capital Management (the seventh largest with $28.6 billion or Rs 1,14,400 crore in assets), according to the Sebi website.

Renaissance, founded by 69-year-old Jim Simons, is based out of Manhattan, the US, and is perhaps the most interesting hedge fund. It has more than 260 employees — many of them are PhDs and not conventional analysts from management schools.

The hedge fund major’s Medallion Fund uses trading algorithms to invest across the world markets.

It returned more than 50 per cent in the first three quarters of 2007, according to a Bloomberg report. It had about $6 billion (Rs 24,000 crore) in assets as of July 1.

Renaissance’s returns stand out as the turmoil in the US credit markets and the meltdown in stock prices across the world took a knock on many hedge funds. Bear Stearns, for instance, saw two of its mortgage-related hedge funds falling into bankruptcy.

Others such as Goldman Sachs’ Global Alpha Fund, which competes with Renaissance’s funds, lost more than 25 per cent in the same period.

The approval, which was given in January, follows efforts by Sebi to get hedge funds and other overseas investors to register and participate directly in the Indian markets instead of through Participatory Notes or P-notes, which are offshore derivative instruments used by investors that are not registered with Sebi to invest in Indian securities.

Sebi had tightened the rules for trading through P-notes in October last year to arrest the surge in foreign inflows.

“It is good. At the end of the day, it is money and Sebi has made the inflow of money into our markets more transparent,” said Prabhat Awasthi, head of equity research and managing director (equities) at Lehman Brothers.

According to Hedge Fund.net, which tracks the hedge fund industry, January was tough for hedge funds that have emerging market strategies, though many believed that India and China’s fast growing economies could withstand shocks to other parts of the international business system.