In India, PE & VC Funds Turn Selective :)

PE and VC funds in India have tightened their purse strings.

PE and VC funds in India have tightened their purse strings.

Private equity (PE) and venture capital (VC) funds in India have tightened their purse strings.

That’s because limited partners (LPs) —the main source of funding for venture capitalists —are reducing their exposure in this space.

According to industry estimates, there has been a drop in new investments to the tune of 71% during the first nine months of 2009 as compared to the same period last year.

😦

Industry experts say limited partners are miffed with the returns shown by the general partners, who manage the fund and its operations on a daily basis.

Many LPs are looking at better returns and shorter investment term cycles, instead.

LPs have instructed some of their funds to conserve cash and value in the existing portfolio. Some limited partners are not investing in private equity funds on an incremental basis.

This assumes significance in the current context because it’s tough to raise fresh funds, and the competition to attract limited partners to VCs is quite intense.

A venture capital firm is usually structured in the form of a limited liability partnership and people who invest in it are limited partners.

In India, the bulk of venture capital inflow is from Foreign markets like the US and Europe, with limited partners mostly being institutional investors such as pension funds and insurance companies and family offices who are mostly based out of the US.

🙂

Indian venture funds are also in place, many of which tap money from overseas by means of an offshore fund.

With new funds not in sight, private equity and venture capital firms are also becoming selective.

😦

One response to this post.

  1. For example, IFN is a closed end fund for India and CAF is a closed end fund for China. Mutual Fund

    Reply

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