How India-based funds are revving up returns for investors
INVESTORS in emerging market funds have enjoyed a terrific 12 months, seeing the value of their investments soar by 35 per cent on average. But some brave investors who have poured money into singlecountry emerging market funds have been rewarded even more handsomely. Funds specialising in Brazil and Russia have performed spectacularly. The BNY Mellon Brazil Equity Fund, for example, has delivered a one-year return of 115 per cent.
India-oriented funds have also proved shrewd investments. Though one-year returns are not as eye-catching, their three-year records are unrivalled, with Indian funds delivering the best returns across all funds, at 100 per cent-plus.
One of those serving investors well is Ashburton India Equity Opportunities, managed by Jonathan Schiessl. It has just celebrated its fourth anniversary and has returned 130 per cent in the past 22 months.
Its success has tempted South African-owned Ashburton Investments to open its doors to a wider audience. In June, a new share class denominated in pounds rather than dollars was launched, bringing the fund within the reach of UK investors.
Schiessl believes the Indian economic growth story is a powerful one that is here to stay.
He says: ‘India is a compelling case of greater consumption, massive urbanisation, increasing use of technology and a government under Narendra Modi that is determined to improve the country’s creaking infrastructure. It’s spending money on the railways and on the roads.’
But it does not mean he is anything but meticulous about how he goes about picking stocks. Bear traps await aplenty, he says, especially for foreign investors who face restrictions over how much stock they can own.
He says: ‘As a foreign investor, you’re a minority investor and very much bottom of the pile. As a result, you have to ensure that any company you invest in passes acceptable corporate governance standards. I’m obsessed about this issue. I want to ensure that as a minority shareholder I’m getting as much as a majority stakeholder, be it government or a family.’
So, though Schiessl has more than 5,000 Indian companies to choose from – listed on either the National Stock Exchange or the longer established Bombay Stock Exchange – he has whittled down his investable universe to no more than 100 stocks.
Currently the fund holds shares in just 28 of these – businesses that he claims have ‘great track records and understand shareholders’.
He adds: ‘I adopt a concentrated approach. I’m not interested in trading shares to generate quick profits. I’m after identifying business growth stories that I can back long term and which will reap rich rewards for investors. On average, I will do no more than two or three trades a year.’
Illustrating this approach is Eicher Motors, a top 10 holding in the fund. ‘It’s been a multi-bagger for us – a stock that has generated a massive return,’ says Schiessl.
Eicher has two main strings to its business – making motorcycles under the Royal Enfield badge and lorries, which includes a joint venture with Volvo. Both are flourishing.
‘Royal Enfield is a heritage brand,’ says Schiessl. ‘Eicher has spent money on it and is constantly looking for new markets to sell into. As for its trucks, no one builds them like Eicher. They are designed to survive India’s pothole-ridden roads.’
Ashburton is the investment management arm of South African financial services giant FirstRand. It has offices in London and manages assets of £8billion. Its strong African footprint has enabled it to build an expertise in emerging markets.