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India gets first domestic hedge fund in Forefront

India has just got its first hedge fund, with the Mumbai-based Forefront Alternative Investment Trust registering itself with the Securities and Exchange Board of India (Sebi) under the new alternative investment funds rules, which were notified in May.

The list of new AIFs put up by Sebi over the weekend placed Forefront Alternative Investment Trust in Category-III, a segment reserved for hedge funds.

As per Sebi’s May notification, a Category III AIF can employ “diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives.”

“For the purpose of this clause, alternative investment funds such as hedge funds or funds that trade with a view to making short-term returns or such other funds that are open ended and for which no specific incentives or concessions are given by the government or any other regulator shall be included,” Sebi said. Kohlberg Kravis Roberts (KKR), the US-based private equity (PE) giant, became the first overseas PE player to apply and get approval from the Sebi under the new rules.

KKR India Alternative Credit Opportunities Fund-I was a¬m¬ong the seven funds registered as of August 16, according to Sebi. Other AIFs registered with Sebi included U¬t¬t¬hishta Yekum Fund, India Q¬uotient Investment Trust (b¬o¬th Category-1 VC funds), E¬xcedo Realty Fund – I, Sa¬b¬re Partners Trust (Category-II f¬unds) and IFCI Sycamore I¬n¬dia Infrastructure Fund (C¬a¬tegory-I infrastructure f¬u¬nd). Under the new AIF r¬u¬¬l¬e¬s, only those funds that p¬l¬a¬nned or have raised funds from India are required to re¬gister with Sebi. The Sebi re¬g¬istrations now pave the way for these players to raise mo¬n¬ey from Indian market a¬s f¬u¬nd raising is becoming t¬o¬ugher in their home markets.

Some of the foreign private equity funds said they are open to the idea. KKR officials did not comment on the issue. KKR India is registered under Category-II. This segment constitutes AIFs such as private equity funds or debt funds for which no specific incentive or concession is given by the government or any other regulator. Funds in this category are prohibited from undertaking leverage or borrowing for anything other than day-to-day operational requireme¬nts as permitted under these regulations, Sebi said.A person close to the development told Financial Chronicle that the AIF registration with Sebi was only “an enabler” and the KKR India doesn’t have any immediate plan to raise fund in India.

The PE giant has invested about $1 billion in Indian fi¬r¬m, including $250 million in Bharti Infratel, since setting shop in India in November, 2008, according to news reports. Some of the other firm where KKR has invested in India include Kolkota NBFC Magma Fincorp, Dalmia Ce¬ment and Avanta Power. Ho¬wever, a senior advisor from a law firm said several foreign PEs are exploring opportunities to mobilise funds from the Indian market, especially from big family offices and h-igh networth individuals, for their India-focused funds. “Globally, as we a¬ll know, it is increasingly becoming diff¬ic¬u¬lt to raise fu¬n¬ds. So, India is considered an option for fu¬n¬d raising in the future for some big foreign PEs,” the official said on the condition of anonymity, as hi¬s firm is advising some funds on this strategy.According to Sebi, AIFs are required to register with the regulator wi¬thin six months of the notification, which is by September-end.
Source: My Digital FC

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