Type: Offshore Oeic
Aim: Growth by investing mainly in the equities or similar securities of Indian companies
Minimum investment: Lump sum £1,000
Investment split: At least 70% in the securities of Indian companies, up to 30% in cash, cash equivalents, money market instruments, investment funds and/or debt securities
Place of registration: Dublin
Charges: Initial 5%, annual 1.6625%, performance fee 20%
Commission: Initial 3%, renewal 0.5%
Gemini Investment Management has introduced the first Indian fund available to UK investors to be managed from India. It is run by Mumbai-based Motilal Oswal Asset Management and will comprise 20 to 30 undervalued Indian securities, mainly equities.
The fund is benchmarked against the Nifty 50 index comprising thebiggest most liquid securities on India’s National Stock Exchange.
Hargreaves Lansdown fund analyst Richard Troue says: “Gemini aims to bring boutique managers to UK retail investors that have perhaps only been available to foreign or institutional investors in the past. Its Indian offering is managed by MOSt, a well resourced team who are based on the ground in India. This local knowledge could give it an important advantage in spotting trends likely to drive company growth whether this be at the consumer level or looking at wider economic trends.”
Troue observes that the MOST team is aiming to capitalise on what it terms India’s Next Trillion Dollar (NTD) era. He says: “In a nutshell they believe that India’s GDP could hit $2 trillion by 2015 and that if India follows the precedent set by China this momentum could continue beyond 2015.”
Troue adds that with a population of around 1.2 bn, a significant proportion of which are under the age of 30 , India has the demographics to support this development.”India has a keen workforce to build the infrastructure the country still badly needs and a growing middle class keen to spend their new found wealth. Media, telecommunications, financial services, education & healthcare, and motor vehicles are some of the areas upon which the manager intends to focus on, looking in particular at areas with strong barriers to entry and businesses that have talented management teams who demonstrate integrity. The recent corruption scandals, despite involving government officials, demonstrates how important this is.”
Troue adds that MOSt will also focus on share prices, looking to estimate the intrinsic value of a stock, believing it is better to buy cheap than sell dear.
“Overall, I like the approach the manager is using. It is essentially a team of bottom-up stock pickers using a value based approached, but will also have the opportunity to leverage local knowledge. Its processes have been refined over 20 years and the portfolio will contain between 20 and 30 best ideas meaning the manager can place a high conviction behind each one and make sure they all contribute to performance.
Turning to the less attractive features of the fund Troue says: “I’m not a fan of the performance fee on this fund. The hurdle is at least an equity benchmark, the S&P CNX Nifty 50 Index, but if it insists on charging a performance fee I would ideally like to see a lower annual management charge.
“Alternatively, if the annual management charge was to remain the same, a lower performance fee, in the region of 10 per cent for example, would be preferable.”
On the whole Troue thinks there are only a very limited number of circumstances where a performance fee is worth paying and he does not yet have the conviction in the MOSt team to see this as the case. “I believe there are alternative funds available without a performance fee that will do an excellent job for investors over the long term,” he says.
Turning to the main competition the fund will face Troue says: “There are a number of India focussed funds available to UK retail investors. Two of my favourites are Jupiter India and First State Indian Subcontinent.”
Suitability to market: Average
Investment strategy: Good
Adviser remuneration: Average