The fund, which is based on an Indian registered fund launched in September 2004, will invest in a concentrated portfolio of 35-45 stocks across the market cap spectrum. It will be managed by senior portfolio manager Paritosh Thakore using the MSCI India index as a benchmark.
Thakore has 19 years’ investment experience and joined the ABN Amro group in 1995. He was previously a market specialist in India and Korea at Unifund.
Thakore’s stock selection for the new fund will be based on a combination of top-down and bottom-up approaches. The universe of approximately 6,000 Indian stocks will be screened using quantitative and qualitative methods to provide a smaller list of possible stocks. The next stage is identify sectors and themes that will benefit from what is going on at a broader macroeconomic level.
According to ABN Amro, the Indian market is growing rapidly, outpacing growth in developed markets, but it is difficult for UK investors to access. This fund provides access to the market in an exclusive form rather than as part of a wider emerging markets fund.
Looking at India itself, growth is expected in domestic companies and those which are driven by exports. AMN Amro notes there is a good spread of industries in India, from film to railways, which makes It easier for the companies to take advantage of global trends.
Outsourcing is still a good source of growth and India is benefiting from Western companies outsourcing to the region because English is a widely spoken language and labour is relatively cheap. This trend is creating employment opportunities which is driving incomes upwards and feeding demand for consumer goods, particularly among the emerging middle classes. This means the economy can sustain growth domestically and is not simply relying on foreign investment.
However, investing in this market can still carry high risks – as an emerging market it has less political and social stability than developed countries and the pace of reform needs to keep in line with the pace of growth. There is also a concern than interest rates may rise faster than expected and profit margins on businesses which already have low processing costs could put profit margins under pressure.