The Hindu Business Line : Old Lane plans $500-m India-specific pvt equity fund

The choice of the name itself may have been on the spur of the moment, but its founders - all with varied and vast experience in investment banking - have studied global economic trends, the financial markets and fund flows to decide on their business model.

The partners were concluding negotiations for a property in New York for their office, when the real estate agent asked for the name of the company that was taking the property.

The partners had looked at various name possibilities - Greek goddesses, rivers, mountains and even bird families. "We found all of them had been taken," says Mr Guru Ramakrishnan, co-founder of Old Lane. "One of our partners was living in Old Lane and we decided we would have that name for our firm," he adds.

Founded by former senior executives of Morgan Stanley, a global investment banking and financial services firm, Old Lane will shortly launch a $3 billion hedge fund and a $500 million India-specific private equity fund that will invest in the infrastructure sector, according to the40-year-old Mr Ramakrishnan.

Three major trends in the global financial markets helped Old Lane finalise its business strategy. One, a significant part of the assets side of companies' balance sheets are becoming more transparent, because of which a lot of liquid assets are getting traded and distributed broadly. These are being managed by next generation intermediaries such as private equity firms and hedge funds.

Two, the East will outgrow the West in the next 10-15 years. The relative sizes of the economies will become so huge that the East can no longer be taken for granted. The last is that there is a lot of disintermediation going on in the financial services. In the 1980s and 1990s, banks used to be the largest providers of credit, after which it was the turn of financial services firms and investment banks.

The various funds such as private equity funds and hedge funds are increasingly disintermediating securities firms now, according to Mr Ramakrishnan, who has a post-graduate qualification in business administration and was with Morgan Stanley for 18 years handling its global equities business.

In the background of these changes, Old Lane will launch a $3-billion hedge fund to invest in a global multi-asset framework. The fund will invest in fixed income markets, equity markets, commodities markets and in illiquid securities, Mr Ramakrishnan told Business Line here.

The fund, according to him, will be based in New York with offices in London, Mumbai and Chennai, and either Hong Kong or Singapore. The fund has got 45 people working for it and it should be up and running by April 1, 2006.

The $500-million India-specific fund, he said, would invest in a range of infrastructure sectors that would include areas such as health care (medical diagnostic services), energy, technology and telecommunications.

The fund would look at financing commercial real estate projects, those businesses that go through a transformation from a family-run one to a professionally operated one, and government to private sector transition. Mr Ramakrishnan said the fund would tie up with partners, who would bring to the table expertise in their respective sectors while Old Lane would offer its expertise in financing and structuring the projects. The fund had tied up with a large infrastructure provider and a large engineering and construction company, both of which he declined to name. It would shortly tie up with a commercial real estate firm.

The India-specific fund would be a 10-year fund and the average size of any investment would be $10-15 million. It would take about three to four years to get fully invested and the fund was targeting a return of 15-20 per cent for its shareholders.

Investors in both the funds would be endowments, foundations, high net worth money and some sovereign investors.

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