Hedge funds, FCCBs catch the fancy of India’s super rich

Business Standard – Hedge funds and foreign currency convertible bonds (FCCBs) are replacing real estate as popular offshore investment destinations for India’s richest.

Hedge funds are investment funds which employ various strategies to produce absolute returns. These strategies could be long- short, event driven, arbitrage or of various other types. A long-short strategy involves buying stocks which are assumed to perform high and selling stocks which are assumed to perform low.

As hedge funds are considered to be a high risk asset class, they are recommended to only a few “ultra high net worth and sophisticated” clients only. "Currently we are recommending 10-15 per cent allocation in strategies such as long -short and arbitrage to well-informed HNIs", said the head of a private bank. The returns range from 12-15 per cent annually in dollar terms.

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