A raft of new regulatory rules introduced in response to last year’s short seller attack on Adani, one of India’s biggest companies, has prompted several hedge funds to consider scaling back their investments in the country, according to a report by the Financial Times.
The new rules proposed by Indian markets regulator Sebi will require large foreign investors — including hedge funds — betting on Indian stocks to reveal all their “end investors”, something the funds argue would create “severe practical difficulties” and are a stark departure from standard international practice.
Large global banks including JPMorgan, Goldman Sachs, BNP Paribas, Société Générale and UBS wrote to Sebi in January opposing an earlier version of the rules, but some have now withdrawn their opposition after Sebi clarified a number of exemptions including for university funds and endowments.
Hedge funds remain in the remit of the the new regulations, which will require foreign investors with more than $3bn of assets in the Indian market to disclose “granular details” of end investors benefiting from the investment.
According to the FT, this includes any hedge funds using prime broking services at a bank which has itself breached the $3bn threshold and also covers investors that have allocated 50 per cent of their Indian portfolio to any one company.
In a letter to Sebi this week, London-headquartered hedge fund trade body AIM wrote: “The changes create severe practical difficulties for [foreign investors] wishing to make legitimate investments in India.”
