Dear Editor,
I am a corporate transactional lawyer based in New Delhi. These days I am getting a lot of queries and concerns from hedge fund investors abroad about the lack of specific laws or guidelines regarding investments in hedge funds in India. I would therefore like to share with your readers the present legal implications relating to this subject.
In order to invest in a hedge fund in India, it has to be registered. However, Indian law is silent on the registration of hedge funds and their requirements. Moreover, it does not formally recognize hedge funds as a mode of investment.
As per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995, the list of entities that can be registered as foreign institutional investors (FIIs) does not include hedge funds. Considering this issue, there are two alternative routes available: a) the investor can either invest in FIIs registered in India; or b) register as a FII and raise money for the fund. Generally, participatory notes are issued by FIIs as a tool for investing in hedge funds.
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