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A passage on India

Simplistic and impolite as it may have been, my suspicion, voiced here last week that the presenters on the IQ Summer roadshow I have just chaired might first acknowledge the horribly tough investment environment and then offer reasons why their fund is so peculiarly well-placed to deal with it did not prove too wide of the mark.

Leading the charge was Stuart Thomson, chief economist and senior fixed income fund manager at Ignis Asset Management, who argued Bank of England boss Mervyn King’s non-inflationary, constant expansion or ’Nice’ decade has given way to one that is more volatile inflation, low expansion and thus ’Vile’.

Neatly working in Keynes’s Paradox of Thrift – if everybody saves, nobody benefits – and Churchill’s observation that a nation taxing itself into prosperity is like “a man standing in a bucket and trying to lift himself up by the handle”, Thomson argued conditions required a fund offering a low correlation to the interest rate cycle and protection against market volatility that would complement an investor’s existing holdings by providing diversification.

Having heard his presentation eight times now, in venues ranging from Leeds to Exeter to London, I have developed the distinct impression he may have had a particular fund in mind and I dare say you will find it advertised somewhere within these pages.

Hard times for the world’s governments was also a theme for Jacob de Tusch-Lec, who highlighted how investors can now find similar yields from the bonds of countries that are almost bankrupt and the shares of companies with very strong balance sheets.

The Artemis Global Income manager was looking to illustrate that not only is equity income more interesting than fixed income from a macroeconomic point of view, but it is also presenting better opportunities than UK equity income.

His assertions that there are some £800bn of corporate dividends on offer globally, and that he was able to pick from a universe of 800 or so companies around the world yielding more than 3% with dividend growth above 5%, as opposed to about a tenth of that in the UK, were certainly powerful.

Arguably the most upbeat of all the speakers was Jupiter India manager Avinash Vazirani – but, then, why would he not be? The arguments in favour of investing in India – not least the extraordinary demographics and the huge numbers reminiscent of China a decade ago – are well-rehearsed.

So, of course, are the risks and Vazirani was not shy of tackling them head-on. The four “challenges” he picked out were inflation, government finances, corruption and company valuations – “an argument I have been hearing for at least the last 16 years”.

Vazirani suggested inflation in India has peaked, with good harvests helping to stabilise food prices that had spiked following the 2009 drought, and that monetary policy was nearing the end of the tightening cycle.

Meanwhile, India’s budget deficit is decreasing and the country is also cracking down on corruption – as evidenced by it having more billionaires in custody and awaiting trial than one tends to find elsewhere in the world.

As for company valuations, an issue that has been known to stop would-be investors in their tracks, Vazirani argued they were at present slightly below the historical average on both a price/earnings and price-to-book basis.

Incidentally, his fund’s biggest holding is Godfrey Phillips as sales of cigarettes should spiral as they are supposedly a healthier alternative to the more prevalent Indian roll-up, the beedi. “Cigarettes as a healthy option” is not an argument one hears too often.

The roadshow’s final speaker was Henderson’s director of technology investment, Stuart O’Gorman. I will return to his thoughts on profiting from global innovation when I have recovered from the blatant trichochromism – my word, and I’m very proud of it – inherent in his observation that, over the last decade, technology has been “the unloved ginger stepchild” of investment.

Julian Marr is editorial director of and


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