The hypothesis that locally domiciled Indian equity managers have greater insights into the microeconomic landscape for companies, via connectivity with local brokers, networks, and research needs to be tested.
In this note, we seek to assess the performance of local India funds in comparison to foreign-based India funds.
Most investors investing into India from overseas gain exposure to Indian equities via Foreign Funds, ETF’s or Emerging Market Funds. However, we feel active, regionally focused management can add significant value to an investors returns.
Performance over a 10 year period
We have compared performance over a 10 year period, using a year-by-year analysis from July 2004 to June 2014. For each period we compare the median achievement of both local funds and foreign funds.
Key Findings
Local Funds outperformed Foreign Funds by 1.85% and the BSE 200 by 2.02% per annum over the 10 year period. This produces a significant compounded effect over time. Additionally local funds seem to deliver stronger returns in up markets due to their ability to identify a broader set of growth opportunities. We feel this advantage is driven by networks, contacts, local brokers and ability to invest in more mid and small cap companies.
We accept that the median fund is not necessarily the investment experience of an investor. However, it presents a method by which to portray the average funds return. The significant dispersion of returns for local funds, given that there are significantly more local funds than foreign funds, means that strong due diligence in manager selection can pay handsome rewards through improve returns.
Conclusions
It is our view that local investment managers present a strong choice for investors, given significant local insights, connectivity to markets and information and the ability to invest in lower capitalisation names due to generally lower AUM size.
This allows investors to participate in the growth stories of India from an early stage when their return trajectory is far steeper. Our multi-manager philosophy ensures that the underlying investment teams managing the funds, remain the within the optimal selection set of India Avenue’s Investment Team at all times.
India Avenue is a boutique investment management firm providing investment solutions that allow our clients to benefit from India’s remarkable growth story.
OUR BUSINESS
2005
The journey towards the “birth” of India Avenue originated in 2005, when ING Investment Management started a business in India as a separate division, utilising a practiced multi-manager philosophy in markets like Australia, and exported it to India. Three of our founders, Mugunthan Siva, Rajeev Thakkar and Sajjan Raut Desai worked together for INGIM (India), building investment strategies and structures, under this philosophy and applying them to Indian capital markets
2011
In 2011 our founders started discussing the possibility of building an investment firm with a capability to provide a focus on India as an stand-alone investment jurisdiction for foreign investors. The founders identified Australia and New Zealand as nascent markets for investing in regional locations, with the potential to accelerate given education and insights which the firm could provide.
2015
By 2015 the group of founders decided to work full-time on this concept to bring it to life. They did this by leaving their existing employment, thus exercising high conviction in the investment region of India as a long-term structural story for investors in Australia and New Zealand. Thus, the firm India Avenue Investment Management was registered and came to life in 2015 in Sydney, Australia.
2016
After building our business for a period of 12 months, our first fund, The India Avenue Equity Fund was launched on 6th September 2016, with strong service provider partners like Equity Trustees (RE), Mainstream (Fund Administrator), KPMG (Fund Auditor) and BNP India (Custodian).
NOW
India Avenue is now a boutique investment business firm, with clients spread across family offices, high net worth individuals, wealth advisers and financial planning firms. Our firm has focused on education and knowledge as a driver of investment behaviour and have taken a long-term approach towards Australian and New Zealand investors contemplating an allocation to India’s growth as part of their portfolios. Our firm has assets in excess of A$50m and the India Avenue Equity Fund is rated “Recommended”* by Lonsec and is available on multiple investment platforms across Australia and New Zealand.