Foreign pension funds are making a beeline for India despite the
turmoil in global markets. More than 40 such funds (endowments and
university and family foundations) have registered with the Securities
and Exchange Board of India (Sebi) in the past seven or eight months.
The Bombay Stock Exchange's benchmark Sensex is more than 40 per cent
off its peak this year. Yet out of the top 20 global pension funds,
more than 15 are investing in India, according to Watson Wyatt.
Watson Wyatt estimated global pension assets at $24,932 billion at the
end of last year. Even if India were to receive 5 per cent of this, it
will mean a boom for Indian markets.
"From what we have learnt allocations to emerging market equities are
certainly going up simply because developed markets are slowing down,"
said Rashmi Mehrotra, business leader at investment consulting firm
Mercer, which advises pensions, endowments and charities on the
relative returns of fund managers managing different asset classes.
"Pension funds want to allocate more to alternative asset classes,"
she added, "so when we say foreign institutional investors (FIIs) are
withdrawing from India, it may not actually be pension funds because
these are long-term players."
Rolls-Royce Pension Fund, Walt Disney Retirement Plan and Teachers'
Retirement System of Texas are some of the top pension funds that have
registered in the current year. Foundations such as Broad Foundation
and Malaysian Community and Education Foundation have also found a
place.
One reason for pension funds' interest in India is easier regulation
by Sebi. Last October, Sebi allowed pension funds to register as FIIs
even if they are not regulated by their domestic securities market
regulators but provided they are regulated by some other regulator
like a tax authority in their home country.
"These funds, on account of their large capital base and longer-term
commitments, are more stable and more resilient against temporary
downturns in a market, focusing on long- term fundamentals that
continue to be relatively strong for India," said Siddharth Shah of
Nishith Desai Associates.
Many of these pension funds and endowments are LPs (limited partners)
in India-focused private equity funds. Private equity and venture
capital funds admit that there has been little change in their fund
allocation stance except for taking a company's track record into
greater account.
A case in point is Lightspeed Venture Partners, which recently raised
a $600-million fund. "It has not been difficult for us. In fact, we
received more subscriptions than needed," said Srini Vudaygiri,
managing director.
"They take a fairly long-term view because they have seen many of
these market cycles. They expect anything ranging from three to four
times their investment as returns," added Sateesh Andra, venture
partner at Draper Fisher Jurvetson.
Source: Business Standard
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