INSUBCONTINENT EXCLUSIVE:
Foreign institutional investor flows into Indian equities are $11 billion year-to-date.Sovereign wealth funds are piling into India, buying
stakes in everything from airports to renewable energy, attracted by political stability, a growing middle class and reforms making it more
enticing for foreigners to invest.Wealth and state pension funds are expanding their horizons to private markets, to complement an existing
focus on stocks and bonds."India is popular with sovereign wealth funds," said Tihir Sarkar, London-based partner at Cleary Gottlieb, which
counts several prominent sovereign funds as clients."Almost every jurisdiction in the western world is raising the bar for entry for foreign
investors but in India it's the other way round
There's also the attraction of the demographics and a lot of assets that sovereign funds like, such as infrastructure, where there's a
huge appetite for foreign funding."Prime Minister Narendra Modi's election win last month consolidated his party's power base and is
expected to stimulate further foreign investment.Foreign institutional investor flows into Indian equities are $11 billion year-to-date,
surpassing the total annual tally in each of the four previous years and setting 2019 on course for the highest annual inflows since 2012
India's benchmark BSE Sensex has soared nearly 10 per cent year-to-date."The rapid rise of an educated middle class offers enormous
opportunities for the deployment of long-term capital, the kind that sovereign wealth funds are ideally suited to provide," said Ravi Menon,
chief executive officer of HSBC Asset Management India.The New ChinaThe attention sovereign funds are giving India is like that they have
paid to China, now clouded by a trade war with the United States, said a banker specialising in institutional investors
In the public markets, funds were focused on public equity and fixed income, he said
In the private market, momentum is also building.Private equity deal activity in India surged to $19 billion in 2018, the highest level in
at least a decade, according to PitchBook data
Sovereign wealth funds and pension funds participated in about two-thirds of that amount.Among recent deals, Singapore's GIC sovereign
wealth fund and the Abu Dhabi Investment Authority (ADIA) this month agreed to make a further investment of $495 million in renewable energy
firm Greenko Energy Holdings, which has wind, solar and hydro projects.India is widening its use of solar and wind energy to help reduce its
reliance on fossil fuels.In April, ADIA and India's National Investment - Infrastructure Fund (NIIF) agreed to buy a 49 per cent stake in
the airport unit of GVK Power - Infrastructure.Another wealth fund is in talks on an infrastructure investment, while Canadian pension funds
are seeking similar deals, said a source familiar with the matter.Canada Pension Plan Investment Board and GIC earlier this year
participated in a $145.8 million buyout of Oakridge International School, an operator of schools in India.ADIA, the world's third-biggest
sovereign wealth fund, which has been investing in Indian equities and fixed income for years, has broadened its focus to include asset
classes such as infrastructure, real estate and private equities, said people familiar with ADIA's thinking.Its increased interest in
India is driven by the country's strong growth potential, positive demographics and continued economic development, the people said
More than half of India's 130 crore population is aged under 25.The push comes as India and the United Arab Emirates seek to strengthen
economic and trade ties.Reform PushRegulatory reforms are also bolstering sentiment and drawing in wealth funds.Indian-based fund managers
were from this year licensed to manage foreigners' portfolio holdings in the country, where previously such assets had to be managed outside
India.Prashant Khemka, founder of White Oak Capital Management which advises London-listed Ashoka India Equity Investment Trust, said that
change had helped kick-start the onshore fund management industry for foreign-sourced funds."This could be looked back on as an inflection
point in the growth of the Indian fund management business," said Khemka, one of four fund managers to gain such an approval so far
Institutional names, including sovereign wealth funds and pension funds, account for around two-thirds of his clients.Bankruptcy resolution
rules introduced in 2016 helped pave the way for ADIA's $500 million investment earlier this year in a distressed debt fund.The investment
was seen as an effort to launch a secondary market in India's mountain of distressed debt and help ease the burden on local banks.But some
say more reforms are needed.A source close to several wealth and pension funds said many would like to see the government further overhaul
tax rules, building upon a new goods and services tax that is credited with helping cut red tape, and undertake land and labour reforms.
