Wealth Management

Rise of owner-fund managers: Implications for Indian investors

Jan 2019

Read Time: 4 minutes

Winds of change are blowing across the Indian investment management sector. Buoyed by easier regulations and tax clarity for Alternative Investment Funds (AIFs), investment advisory and Portfolio Management Services (PMS), and greater availability of domestic capital, star fund managers are turning entrepreneurs. The phenomenon of the owner-fund manager is gathering momentum, and we think this could change the face of the Indian fund management industry. 

Evolving AIF Regulations and tax clarity

Setting up an onshore fund in India became a lot easier after SEBI introduced the AIF regulations in 2012. Launching onshore hedge funds became possible for the first time. As of 30 June 2016, SEBI had permitted nearly 235 entities to set AIFs. Category I and II AIFs have been given a tax pass-through status, ending much of the uncertainty related to the taxation of gains. 

Rise of The Domestic Limited Partner

There are larger pools of domestic capital available in India today and investors are looking for differentiated strategies that can help them maximize their returns. Alternative investments are becoming popular among this set. 

Increasing momentum of alternatives as an asset class

More than half of the 660 global institutional investors surveyed by Natixis Global Asset Management in 2016 said that it is essential to invest in alternatives to outperform in the broader markets. Investments made by AIFs surpassed INR 24,800 crore at the end of the second quarter of 2016-17, as against INR 11,255 crore at the end of September 2015

A new breed of fund managers eager to plug the gaps

India has a wider pool of experienced fund managers, across asset classes today. These fund managers have the confidence, expertise, as well as a strong network of relationships to fly solo. Several fund managers are dissatisfied with the typical administrative hassles and incommensurate incentives at established funds and institutions. Payoffs in a smaller setup can be similar or even better than at larger organizations, without the hassles

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