Hedge funds are privately pooled investments that ‘hedges’ or reduces market risks and uses various complex strategies to deliver high returns. They typically cater to HNIs (high-net-worth individuals) as the minimum investment starts from Rs.1 crore. Hedge funds work independently of the market index and are actively managed by many seasoned fund managers. Interested to invest? Here’s a list of the 15 best hedge funds in India you can consider investing in 2023. Read on!
The following are the best hedge funds 2023 in terms of AUM (Assets Under Management).
|S No.||Name of the Hedge Fund Firm||AUM|
|1.||Blackrock Advisors||$8.5 trillion as of second quarter 2022|
|2.||Citadel LLC||$50 billion as of May 2022|
|3.||Bridgewater Associates||$235.5 billion as of May 2022|
|4.||AQR Capital Management||$145.5 billion as of March 2022|
|5.||Man Group PLC||$151.4 billion as of March 2022|
|6.||Renaissance Technologies||$121.8 billion as of March 2022|
|7.||DE Shaw & Co LP||$128 billion as of March 2022|
|8.||Tiger Global Management||$124.7 billion as of June 2022|
|9.||Two Sigma Investments LP||$81.2 billion as of March 2022|
|10.||Millennium Management||$341 billion as of March 2022|
|11.||Elliott Asset Management||$83.5 billion as of June 2022|
|12.||Davidson Kempner Asset Management||$44.1 billion as of June 2022|
|13.||Lone Pine Capital Management||$35.5 billion as of March 2022|
|14.||Baupost Group Asset Management||$31.6 billion as of March 2022|
|15||Point 72 Asset Management||$138.5 billion as of May 2022|
Disclaimer: An investment in a Hedge Fund is not suitable or desirable for all investors. Only Qualified Eligible Investors may invest in Hedge Funds.
BlackRock Advisors, LLC is the world’s largest asset manager with an AUM of US $10 trillion as of January 2022. It invests in publicly traded companies. This fund firm also maintains a dedicated India Fund that has invested in many start-ups headquartered in Bengaluru. The company offers portfolio management, financial planning, and investment advisory services.
Citadel LLC is an American multinational hedge fund and financial services company with an AUM of US $50 billion as of May 2022. Its investment strategy is to invest in equities, fixed income, commodities, quantitative strategies and credit.The Company offers portfolio construction, risk management, financial planning, and investment advisory services. Citadel Advisors serves customers worldwide.
Bridgewater Associates, an American investment management firm, serves institutional clients including endowments, pension funds, foundations, central banks and foreign governments. As of March 2022, the AUM of the firm is $235.5 billion. The firm utilises a global macro investing style based on economic trends such as inflation, currency exchange rates, and U.S. gross domestic product.
AQR Capital Management (Applied Quantitative Research) is a global investment management firm based in Greenwich, Connecticut, United States. As of March 2022 the firm’s AUM is $145.5 billion. The firm is a strong proponent of diversification within portfolios, as well as adding strategies with low correlation to traditional asset classes as a complement to existing portfolios.
Man Group PLC is an active investment management business listed on the London Stock Exchange. As of March 2022, the AUM of this firm is $151.4 billion. It is the world’s largest publicly traded hedge fund firm. It offers over 75 investment strategies across a variety of investment styles, approaches and asset classes and trades in over 800 markets worldwide.
Renaissance Technologies LLC, also known as RenTech is an American hedge fund that specialises in systematic trading using quantitative models derived from mathematical and statistical analysis. As of March 2022, the AUM stands at $121.8 billion. This fund firm uses quantitative trading, where staff tap data in its petabyte-scale data warehouse to assess statistical probabilities for the direction of securities prices in any given market.
D. E. Shaw & Co., L.P. operates as an investment and technology development firm. The Company provides investments in equities, futures, and options, as well as offers portfolio management and financial advisory services. As of March 2022, the AUM of D. E. Shaw & Co. is $128 billion. The company manages a variety of investment funds using quantitative methods, proprietary computational technology, and qualitative analysis to make private equity investments in real estate, technology, financial services, wind power and distressed company financing.
Tiger Global Management, LLC (often referred to as Tiger Global and formerly known as Tiger Technology) is an American investment firm. It mainly focuses on the Internet, software, consumer, and financial technology industries. It invests in publicly traded companies by using equity strategies and as of June 2022, the AUM is $124.7 billion.
Two Sigma Investments is a New York City-based hedge fund that uses a variety of technological methods, including artificial intelligence, machine learning and distributed computing, for its trading strategies. A few specialised divisions focus on private investments, venture capital investments. As of March 2022, the AUM stands at $81.2 billion.
Millennium Management is an investment management firm with a multi strategy hedge fund offering and is made of 280 investment teams. The firm operates in America, Europe and Asia. It is one of the world’s largest alternative asset management firms with an AUM of over $50 billion.
Also known as one of the world’s largest activist funds, Elliott Management Corporation is an American investment management firm. It is a multi-strategy hedge fund and its AUM stands at $83.5 billion as of June 2022. The Company provides portfolio management and consulting services to pension plans, endowments, foundations, sovereign wealth funds, individuals and families.
Davidson Kempner Capital Management LP is a global institutional alternative investment management firm with over $44.1 billion AUM. It employs a bottom-up, fundamental method of investing and a multi-strategy approach. Globally, the firm invests in a variety of credit and equity strategies as well as real assets.
Lone Pine Capital is an American-based hedge fund and investment advisor with an AUM of $35.5 billion as of March 2022. It invests in public equity markets across the world and provides its services to pooled investment vehicles, pensions and profit-sharing plans.
Baupost Group Asset Management is one of the largest hedge funds in the world and has an AUM of $31.6 billion as of March 2022. Since its inception, the firm has generated an average annual return of 20%. According to Bloomberg L.P. Baupost has ranked 4th in net gains since its inception.
Point72 Asset Management, L.P., is an American hedge fund with an AUM of $138.5 billion as of May 2022. The firm is into long/short equity investing, systematic investing, global macro investing and institutional private investing.
Hedge funds invest in debt, equities and derivatives (futures and options). Hedge funds are managed by multiple fund managers. They have almost complete discretion in choosing portfolio composition and investment strategies. This allows them to quickly respond to market conditions and adjust portfolio and risk exposure.
For example, with futures, there is an obligation to buy or sell an underlying stock at a predetermined price, time and date. However, there are no obligations with options trading.
In India, hedge funds were introduced in 2012 by the Securities and Exchange Board of India (SEBI) under SEBI Regulations, 2012. They fall under category III of Alternative Investment Funds (AIF). To qualify as a hedge fund, a fund needs to have a minimum corpus of Rs.20 crore and a minimum investment of Rs.1 crore per investor.
To start investing in these funds, follow these steps:
Find a financial advisor and discuss your investment goals
Research funds that are accepting new investors
Once you have listed the hedge funds, contact them to know the minimum investment amount
Verify yourself as an accredited investor by providing income, debts, assets and experience. Have these documents confirmed by your bank or an investment lawyer
As hedge funds offer the highest maximum potential returns, they also come with very high risks. Due to their high aggressiveness, losses can be very high similar to profits promised.
Every hedge fund comes with its own financial goals and philosophy, which influences its strategies. Investors will need to check if the fund’s goals align with their own before investing.
Besides an expense ratio, these funds also charge a management fee. In India, the expense ratio can be up to 2%, while management fees can be around 1-2%. There is also a considerable performance fee of around 10-15% applicable.
As it is a Category III AIF, taxes are applicable at the investment fund level. Unitholders are not liable to pay taxes on these funds.
Hedge funds are category III AIF. For annual earnings from these funds over Rs.5 crore, the applicable tax rate is 42.74%. Also, unlike mutual funds, hedge funds are not given a pass-through status on tax. Meaning, the income from these funds are taxable at the investment fund level and the tax obligation does not fall on the unit holders.
Hedge funds are investment options targeted towards high net-worth individuals and large institutions. They apply various complex investment techniques, including hedging and arbitrage, to achieve their financial goals. The best hedge funds seek to minimise market risks while aggressively pursuing high returns.Unlike hedge funds, you do not need Rs.1 crore to start investing. You can start with as low as just Rs.10! Head over to Navi Mutual Fund and secure your financial future now!
Although hedge funds do not have to register with SEBI or disclose NAV, they are still regulated by SEBI. The market regulator does not leave these funds unattended but closely regulates and monitors such products. However, SEBI has no legal obligations for these funds.
Hedge funds are supposed to eliminate risks on their investment. However, their strategies to maximise returns while ‘hedging’ end up creating high risks. Due to their highly aggressive nature, their losses can be as high as their promised returns.
Threshold fees are for the benefit of investors who do not want to pay extra fees when their funds are not growing. Each time a hedge fund crosses a certain threshold, it charges this fee.
No, hedge funds follow the concept of hurdle fees so that they cannot charge high incentive fees for small returns. Under this system, they can charge the hurdle fee only on returns above a specific benchmark that is expected from the fund.
Unlike hedge funds, mutual funds are registered with SEBI and must disclose their NAV at the end of a day. Any investor can invest in mutual funds as they only need Rs. 500 to start investing, while hedge funds are only meant for HNIs and large institutions.
Hedge funds are investment options for high-net-worth individuals. They are similar to mutual funds, however, hedge funds use complex strategies to ‘hedge’ against market volatility and risks and provide higher returns. Hedge funds are actively managed by multiple expert fund managers. The minimum amount required to invest in a hedge fund is Rs.1 crore.
The top 5 hedge funds to invest in are:
1. Blackrock Advisors
2. Citadel LLC
3. Bridgewater Associates
4. AQR Capital Management
5. Man Group PLC
Here are the differences between hedge funds and mutual funds:
1. Hedge Funds Use complex strategies to hedge market risks while Mutual Funds are not completely shielded from market risks.
2. Hedge Funds targets high-net-worth individuals as the minimum investment amount starts at Rs.1 crore while anyone can invest in mutual funds through SIP or lump sum for as low as Rs.10.
3. Multiple fund managers manage Hedge fund while in Mutual Funds usually one or two fund managers manage the fund.
4. Hedge fund unit holders are not liable to pay taxes while Mutual funds are taxed as per the holding period (long-term capital gains tax and short-term capital gains tax)
There are four types of hedge funds:
1. Equity hedge fund
2. Global macro hedge funds
3. Activist hedge fund
4. Relative value hedge fund
Hedge funds in India are not required to be registered with SEBI. They are unregistered private investment partnerships. As per SEBI, hedge funds are not subject to the same regulatory requirements as mutual funds.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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