Last week we discussed the mood surrounding China and how that feeling of ambivalence has trickled down into DFMs’ exposure to the region.
Another country we’ve been meaning to cover for a while is India, whose impressive accession has seen it touted by some as the next big thing for investors - the next China.
Last year India overtook its northern neighbour as the most populous nation in the world, and its stock market has boomed of late: the MSCI India index up 24 per cent over the past year.
There are several ways of getting into the sphere and traditionally the most common ways have been through emerging market or Asian funds.
Though in practice accessing a dominant position in India through continent-wide funds is a bit more tricky than it sounds.
Sifting through the top five most popular Asian funds, we found their average weighting to India is just 9.7 per cent.
The largest of these is Veritas Asian with 20.8 per cent to the nation, and the smallest is Federated Hermes, with a mere 1.3 per cent.
And the picture is not so different in emerging markets, either: average manager weighting in these vehicles is slightly smaller still, hovering around 9.3 per cent.
The EM fund in our database with greatest exposure is Fidelity Emerging Markets with 20.2 per cent which is almost double its exposure to China.
Meanwhile the lowest is the excessively-named Pacific North of South Emerging Market Equity Income Opportunities which keeps its distance altogether, though this may be down to desire for yield than anything else.
What else is there?
Well, the universe of India-centric funds is small but growing, and there’s a couple of names that feature in DFMs’ picks on our database, albeit sporadically.
There are seven Indian equity funds held in our database (and one Indian bond fund), most of which are held by one allocator each apart from Stewart Investors Indian Subcontinent Sustainability which is held by two.
The team at JM Finn is overweight India in its portfolios, and we sat down with investment director Karen Lau to find out about the funds they use.
“We've got Stewart Investors Asia Pacific Sustainability, who’ve historically had about 40-45 per cent in India,” she said. “We've noticed they're very good at allocating for us within that region but they are particularly conservative. And that's why quite often where clients are a little bit more adventurous, then we would add something like Ashoka India Trust in there.”
“Ashoka has a very, very different mindset. They're based in India, only charge performance fees, and they’ve been fantastic in terms of performance. So how we allocate to India depends on the client's appetite for risk.”
She added that India has benefited from a shrewd diplomatic position with Russia and that state intervention in markets is less of a worry than in China. Too much of this, as evidenced by Jack Ma's disappearance from the public eye, can spook investors.
The Stewart Investors fund is held by three allocators in our database which puts it just outside the list of the most popular Asia funds.
And Darius McDermott, managing director of the Chelsea managed funds, is another fan of the more direct approach offered by India-only funds.
“We are strong believers in the growth of domestic India. They have some of the best demographics in the world and the population is likely to go through strong wage growth over the next 10 to 20 years,” he said.
“The Indian index has a number of very large companies, most notably Reliance, and they also have a large number of service, IT and production and drug related companies. They may be attractive at different times in the cycle, but our preference is for that domestic growth exposure.”
