Alliance Capital Asset Management (India), one of the largest asset managers in India and an affiliate of Alliance Capital Management which has USD395 billion in assets globally, is looking to boost its use of derivatives for its USD550 million bond portfolio. "As liquidity increases we'll be increasing our activity," said Amitabh Mohanty, head of fixed income in Mumbai. He explained the asset manager has only used overnight-index swaps on the back of its bond portfolio. However, the asset manager will enter the derivatives market in a larger way next year as liquidity grows in the developing market. Volume in the interest rate derivatives market has roughly doubled in recent months on the back of rate cuts (DW, 10/13).
The fund hedges around 5-10% of its bond positions with swaps and Mohanty thinks that could increase to over 25% next year. Additionally, as asset managers in India are permitted to invest up to 10% of their portfolios in foreign assets, Alliance will look at purchasing dollar or euro-denominated structured notes in the coming months, after it receives permission from the Reserve Bank of India in the coming weeks.
