Friday, April 7, 2017

Which is the Best Indian Hedge Fund?

Picture shows a huge monster (Risk) hedged behind a wooden fence
The huge monster 'Risk' is hedged behind a wooden fence

Actual Question:

What are best hedge funds of India in which a small investor, like me, can invest via sip or lump sum mode (and those based on the returns from the last year)?


Dear Friend!

Thank you for raising a question about an ‘Indian Hedge Fund’. It is the first time anyone has asked me about and Indian hedge fund. Honestly, so far I have not come across any Indian hedge fund.

Basically a hedge fund is a fund where the investment risks are hedged or ring-fenced by tools like use of derivatives, shorting and so on.

In in India, I understand that very recently regulations have been put in place for hedge funds to set shop and flourish, and indeed a few funds have come into existence. I also heard that hedge funds are meant only for investors who can invest a minimum of Rs.1.00 crore, so this rules out small investors like me. 

There is also very little publicly available information about Indian hedge funds.

Under the circumstances, it is impossible to recommend the best Indian hedge fund.

But let me console you that luckily there is ample scope and avenues for every small investor. These avenues are:

  1. Direct purchase of shares on the stock exchanges through trading account. You can buy shares a wonderful companies like NHPC, SJVN for as little as Rs.30–35!
  2. Direct purchase of Exchange Traded Fund (ETF) units on the stock market.
  3. Subscription to mutual fund units through SIP.

At the cost or repeated, repetition I repeat that, the only few thing every investors whether big or small has to remember are:
  • True wealth is not created by fancy names, structure and mechanisms like hedge funds, thematic investments, algo-trading, etc.
  • Time is the real creator of wealth and therefore investments need to be held undisturbed for 30–35 years. Therefore, it is advantageous to start early in life.
  • People must follow the simple rule, “invest first - spend next”, every month, with at most discipline for the investing period of 30–35 years. This is the real meaning of systematic investment plan (SIP).
  • Investing success does not depend on investor’s intelligence or IQ but a sound emotional framework - do not allow to possessed by greed and fear.
  • For wealth creation, those who cannot invest themselves directly should invest only in equity based, low-cost, index mutual funds or index ETFs.
  • Debt funds are meant only meant for those who already have large wealth or corpus and are looking for regular income. Recently retired employees and people who inherited significant wealth.

To conclude, it is impossible to recommend the best Indian hedge fund at the moment but one need not grieve, there are plenty of alternative avenues are available for wealth creation for small investors.

Thank you,

With Best Regards