Nothing grows fast in finance without storing trouble for the future and so is also true for Indiaï¿½s exotic funds. Comment.
Exotic funds of India which are meant for the wealthy investors have grown to around $40 billion from a bare nothing in a short span of seven years. The funds have expanded by 71% in the last 12 months. It was particularly after the bankruptcy of the IL&FS Group in September, investors found these funds as an alternative investment fund and committed a figure of around $9 billion to these. There is a possibility of an accident due to a weak property market, troubled financiers of leveraged developers and even the shadow banks. The current liquidity crisis seen in the NBFCs have forced the latter to re-direct their illiquid and poor-quality builder loans to these bespoke funds committing 20 % return to investors.
There is no hidden fact that the Indian economy is growing at the slowest ever pace in last five years. This has given a chance to the wealthy who have the appetite for private equity, venture funds or even hedge funds outside the public markets have specially trained staff to direct these private pools to the middle-class as get-rich schemes. This has put the middle-class investor at risk and the market regulator needs to wake up.