Top-performing India fund since launch: Ashoka India Equity

AIE is the top-performing India fund since launch…by Thomas McMahon

This trust has been awarded a rating by Kepler for growth …Find out more
 

Overview

Ashoka India Equity (AIE) has by far the best track record of any India fund in the closed-ended AIC sector or the open-ended IA sector since it launched in July 2018 (see Performance). Last year was another year of strong performance, as the trust bounced back from the only down year in its history in 2022. Being overweight small- and mid-caps helped deliver these good returns, although stock selection was far more important, as it has been since launch.

AIE is managed by White Oak Capital Management, which has devoted unmatched resources to India. It now has a team of 21 analysts covering Indian stocks exclusively and a further 13 covering them as a part of a broader, emerging market sector responsibility. The process they work to is designed to maximise the impact of stock selection while managing and limiting the potential impact of macro or stylistic factors (see Portfolio). To that end, the team have recently been adding exposure to companies in some more highly regulated areas in which they are typically light. This is in order to ensure their stock-selection successes are not outweighed by the impact of a surge in the more regulated, state-owned sectors, as regulation is considered and the current government looks set to win elections this year.

The managers put their money where their mouths are with this portfolio, and receive no management fee except a performance fee which is earned every three years if performance is ahead of the benchmark (see Charges). Amidst a sea of deep discounts in the investment trust sector, AIE has mostly retained its premium rating (see Discount).

The trust has won a Kepler Growth Rating for 2024, the first year that it had a track record long enough to be considered.

Analyst’s View

No country is immune to the unpredictable factors determining whether the US and global economies enter recession this year. However, India seems to have some of the strongest secular drivers of growth, which could offset this. Government investment in infrastructure spending is driving a rapid increase in capex, while exports are surging as countries shift manufacturing to India from China. Elections are due late this year in which Modi is widely expected to win re-election, which should reassure investors worried about the maintenance and continuation of the reform programme he has implemented since 2014. GDP and corporate profits are showing healthy growth, and in our view India is one of the standout growth opportunities in world equity markets. Valuations are also undemanding, in our view, with multiples around their average for the period since Modi’s reform programme began.

We think AIE is a standout option for investment in the market. The performance of the fund has been remarkable, driven by a huge investment in resources and a strategy designed to encourage and reward stock-selection alpha. We think investing on a modest premium rating can be justified, particularly given the stock-selection pedigree of the managers and the incentivisation of them to continue their success via the performance-fee-only structure.
 

Bull

• The best track record amongst open- and closed-ended India funds since inception
• Large team of dedicated analysts covering the whole market
• Fee structure aligns managers’ interests with those of investors

Bear

• As a single-country trust, highly exposed to the politics and economy of one state
• Highly active approach could lead to periods of underperformance
• Performance fee can be high when earned, although overall fees will be low if it is not

 
See the full research on AIE here >

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Ashoka India Equity. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.