Even as the fate of India’s shadow banks swings precariously between unexpected defaults and sudden downgrades, there’s trouble brewing in another unlit corner of finance.
Exotic funds, designed for wealthy investors, have grown to $40 billion from nothing in just seven years, expanding by 71% in the 12 months through March. Since September, when the surprise bankruptcy of infrastructure financier IL&FS Group triggered a refinancing squeeze for property developers, investors have committed an additional $9 billion to these so-called alternative investment funds.