MUMBAI: Several sovereign wealth funds (SWF) and overseas pension funds are rushing to invest in India, driven by hopes of economic recovery under a new stable government. At least three sovereign funds from West Asia have invested over $5 billion in the past eight months and one global pension fund has committed to invest $450 million.
Two other funds are scouting for investments in India's real estate and infrastructure developers.
"Risk of returns are out of the way and these funds can invest capital for longer tenure," said the head of a realty fund, which has received investments from two SWFs in West Asia.
"They have lesser redemption pressure unlike private equity funds, which have to give returns to their investors in few years."
Private equity (PE) experts say a trend is visible of both SWF and pension funds investing heavily in the past six months. They say they expect to see more such investments this year.
"SWF and pension funds will be the largest investors in the next one year, while the fund of funds and PE funds will stay away after being caught in the two cycles of economic slowdown," said a senior PE fund manager, whose fund runs a distressed asset fund jointly with an American bulge bracket fund.
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Abu Dhabi Investment Authority (ADIA), which had invested roughly $500 million in the past decade, has also upped the ante. Abu Dhabi power company Taqa, owned by ADIA, purchased a 51% stake in Jaypee Group's thermal power projects for $1.5 billion jointly with a Canadian pension fund and local PE IDFC Alternatives Fund.
Last year, ADIA also appointed Suresh Sadasivan as head of its internal equities department for Asia excluding Japan, responsible for developing strategy, managing risk and overseeing management of portfolios.
Oman's State General Reserve Fund, Government of Singapore Investment Corp (GIC) and Temasek committed $200 million investment in a real estate fund run by India's biggest mortgage lender, Housing Development Finance Corporation.
In May last year, Qatar paid $1.26 billion for a 5% stake in India's largest mobile telephony by customers Bharti Airtel.
Canadian Pension Plan Investment Board, which manages $218.1 billion of assets, formed two joint ventures in November last year.
It formed a joint venture with real estate developer Shapoorji Pallonji Group to invest in commercial real estate in India, and formed an equal real estate finance company with billionaire Ajay Piramal group's Piramal Enterprises, which will specialise in debt and structured finance. The fund committed $200 million in the first and $250 million in the second venture. "We will be deploying more and more capital to India and that is fungible.
We are constantly moving our capital, so it can't be seen as what happens to one dollar invested in one project," Mark Wiseman, president and CEO at Canada Pension Plan Investment Board, said after announcing its real estate venture. The fund opened its second office in India outside Canada after Hong Kong.
Consultants say the fund flow to India will rise as Japan allowed its $1.26 trillion pension fund to invest in alternate assets overseas.
"More PE funds will tap the Japanese market, which are negligible now," said manger of an Indian fund that runs a distressed fund with an American bulge bracket fund.
"These funds, which were investors in Indian PE funds, are now seeking to invest directly in assets with a longer tenure," said Sanjeev Krishnan, executive director, PwC, who authored his firm's private equity report released on June 10. "For longer tenure of investments, India is a better bet."