Indian hedge fund index almost back to levels before Ukraine war

Majority of such investments are mending after struggling to provide positive returns in the first two months of 2022

Indian hedge fund investments have recouped most of the losses they made after Russia began ratcheting up tensions in Ukraine before invading its neighbour on February 24.

An index for measuring Indian hedge fund performance is just 1.6 per cent below its October 2021 levels, shows data from tracker Eurekahedge (a company that is part of data provider With Intelligence). Russia began building up troops at the Ukraine border in November. A similar index for emerging market hedge funds is down 4 per cent since then. Indian hedge funds have outperformed in four out of the five months starting November 2021 (see chart 1).

Hedge funds are sophisticated investment vehicles for the wealthy. They are regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012. They typically have a minimum investment of at least Rs 1 crore. They seek to provide returns which are different, and often outsized, compared to regular market returns. Such funds had been facing some difficulties because of the market volatility after Russia’s Ukraine invasion.

The majority of hedge funds struggled to provide positive returns in the first two months of 2022. The proportion of hedge funds which gave positive returns was 42.7 per cent in January 2022. It was 48.3 per cent in February 2022. This has since risen to 61 per cent in March (see chart 2).

“Hedge fund managers were up 1.48% in March, trailing behind the S&P 500 which was up 3.58% over the month. Around 61% of global hedge funds have posted positive returns in March and 46.0% of them have maintained positive performance over the first quarter of the year,” said the Eurekahedge Index Flash report for April 2022.

There were negative returns for two out of the last three months for Indian and emerging market hedge funds, shows data covering the Eurekahedge India Hedge Fund Index and the Eurekahedge Emerging Markets Hedge Fund Index. The recovery in March comes after a shock in the first half of the month because Russia finally invaded Ukraine towards the end of February.

Kenneth Andrade, founder and chief investment officer at Old Bridge Capital Management, said that he did not take large cash calls as a way of riding out the volatility. He suggested that a strategy of continuing to build a long-term portfolio with any opportunities that present themselves during times of volatility works better for ensuring sustainable returns.

“We just stick with that,” he said.

The Eurekahedge Latin American Hedge Fund Index was the best performing regional index. It was up 3.97 per cent in March. The worst performer was the Eurekahedge Asian Hedge Fund Index which was down 1.04 per cent.  

Daniel GM, founder-director at industry-tracker PMS Bazaar, said investors have continued to keep the faith even during the recent volatility. He suggested that they have largely seen it as an opportunity to deploy more capital. Alternative investment funds have continued to get money from high networth individuals and ultra-high net worth individuals with asset gathering continuing its momentum despite the Ukraine crisis, according to him.

“There is no deterioration,” he said.