Renuka Ramnath, the CEO of Multiples Asset Management, recently shed light on the challenges faced by domestic funds in India. According to Ramnath, over 90% of control deals in the country are carried out by global funds, leaving Indian institutions like banks, insurance firms, and pension funds at a disadvantage. While local funds possess the capability to compete, regulatory restrictions prevent them from doing so effectively. Ramnath emphasized the importance of creating a level playing field for domestic funds to compete with their global counterparts.
Regulatory Hurdles and Industry Challenges
Ramnath highlighted the regulatory restrictions that hinder the growth of domestic funds in India. She expressed concerns about the lack of coordination among regulators, leading to outdated rules that fail to address the evolving needs of the industry. These challenges are unique to Indian managers, creating obstacles in their path to success. A comparison between AIF rules in the mainland and GIFT IFSC revealed significant disparities, with the former facing more limitations and restrictions. This disparity can result in mismatched portfolios and hinder the growth of domestic funds.
Gopal Srinivasan, Chairman and Managing Director of TVS Capital Fund, echoed the need for the PE-VC industry to enhance returns by diversifying investment strategies. Srinivasan emphasized the emotional challenge faced by Indian investors when choosing between public markets and private equity. Despite the appeal of long-term compounding in private assets, the median returns often do not differ significantly from public markets, leading investors to prioritize higher returns over emotional preferences.
Ramnath also discussed the challenges associated with using the PMS route for co-investment, highlighting the complexities of ownership and decision-making in dematerialized shares. The need for clarity on investor behavior and managerial control in PMS shares poses additional hurdles for domestic funds. The intricacies of documentation and decision-making processes further complicate the investment landscape for managers, requiring innovative solutions to navigate these challenges effectively.
In conclusion, Ramnath and Srinivasan emphasized the need for regulatory reforms and strategic investments to level the playing field for domestic funds in India. By addressing the unique challenges faced by local managers and enhancing the flexibility of regulatory frameworks, the industry can unlock new opportunities for growth and innovation. As the landscape of alternative investments continues to evolve, collaboration between industry stakeholders and regulators is crucial to drive meaningful change and support the long-term success of domestic funds in India.
