Until now Gemini has been a promoter and distributor of funds from other management groups including TwentyFour and JM Finn. The new fund is Gemini’s first in its own right and will be run by Mumbai-based Motilal Oswal Asset Management, known as MOSt to reflect its origins as Motilal Oswal Securities trading. The firm was founded as a small broking firm in 1987.
Gemini chose Motilal Oswal to manage the fund on the basis of its track record as a domestic manager and its local knowledge of the Indian economy. Gemini believes it is important for an Indian fund to be managed from the country and this distinguishes the fund from Indian funds run by firms such as Fidelity, Jupiter and First State.
The fund is benchmarked against the Nifty 50 index comprising thebiggest most liquid securities on India’s National Stock Exchange. MOSt says this index is difficult to beat because it is so liquid and efficient. Indian funds managed from outside the country are often benchmarked against the broader MSCI India index, which is not recognised by domestic managers.
Gemini’s fund uses a buy and hold strategy, comprising 20 to 30 undervalued Indian securities, mainly equities, MOSt looks for firms with intellectual barriers to entry such as a strong brand image make it difficult for competitors to gain market share. MOSt estimates the expected value of a stock and aim for a margin of safety of 30-50 per cent, to manage risk. Media and telecommunications, education and healthcare, and motor vehicles are regarded as the sectors that should benefit most from economic growth.
The UK subsidiary of Indian firm Kotak Mahinra provides a Luxemburg-domiciled India growth fund that is also benchmarked against the Nifty rather than the MSCI index. However, its funds are managed from Singapore, so it is not a like-for-like comparison with Motilal Oswal.