Sebi open to FII rule compliant hedge funds

Market regulator Securities and Exchange Board of India (Sebi) says hedge funds are welcome to invest in India, provided they comply with the existing regulations for foreign institutional investors (FIIs).

"Why should we be worried about hedge funds... We are not making any separate set of regulations for them... They have been investing in India through participatory notes. All we are telling them is if you want to come here, come through the front door," M Damodaran, chairman, Sebi told PTI in an interview.

"Hedge funds started as a normal class of investors. Over time, they became large with large investors started putting their money in these funds," Damodaran said.

Hedge funds are generally speculative funds managing funds for private investors and also collect a part of the profit, beside a management fee from the investors.

Mostly prevalent in developed markets like the US, these funds are generally used by wealthy individuals and institutions, adopt aggressive investment strategies and are exempt from rules and regulations governing other mutual funds provided the number of investors is not more than 100.

"In FII regulations Act of 2004, hedge funds were not named as a separate class and no specific provisions were made for them... There were no separate regulations for them anywhere in the world," he said, replying to a query on whether hedge funds should be considered a different class.

"Now they want to come to India and we are telling them to go through the FII regulations and if they comply, we will consider your application on the case of merit," he added.