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Inside India

Iam sure it will not be long before the name Insynergy becomes more widely known. It is a relatively new fund management business offering UK retail investors access to talented fund managers, whose skills have previously only been available outside the UK or to institutions.

Insynergy absolute India focuses on Indian equities and is headed by Ashish Mehta of Reliance Asset Management who has over 15 years experience in this area. Reliance is one of the biggest companies in India, covering a diverse range of activities, with financial services being just one element to the business.

The Indian growth story has been somewhat eclipsed by that of China. It is fair to say China’s development is a number of years ahead but I think India is probably the more interesting story for the next 25 years.

A large part of this relates to population trends that give it a demographic edge over China and most other Asian countries. Sixty-five per cent of the Indian population is under 35 and half of these under 25. You might well ask why this is important. Simply, it is younger generations that tend to drive growth forward, especially when they are well educated.

The Chinese, on the other hand, are projected to have a Western-style aging population over the coming decades, which may explain why they are in such in a rush to get things done.

India, like China, offers a long list of mind-boggling facts, which are even more impressive when considered against a more mature economy such as the UK or America. India plans to spend $250bn over the next two years on infrastructure and $1.3 trillion over seven years.

Huge investment has already been made in power generation, with new plants coming on-stream far quicker than expected. India might have experienced some problems in building infrastructure for the Commonwealth Games but it could still teach the UK some lessons in planning.

The needs are pressing though. Scarcely 50 per cent of the roads are paved and pre-planned power shut-offs are daily occurrences in second and third-tier cities. The rural population typically receives only eight to 10 hours of electricity a day.

India’s infrastructure drive and burgeoning middle class are providing plenty of investment opportunities and Reliance believes it is possible to find companies on very attractive valuations that can grow at 20-25 per cent a year, implying a doubling of their share prices every three years.

However, it is not blinded by potential and recognises that rapidly growing economies can become overheated.

It is discerning about company valuations and will sell a share that reaches its estimation of fair value and, in this fund, it has an additional ability to hedge the portfolio by shorting shares in companies it believes are overpriced.

If you are sifting through the market looking for great businesses with good management, you will also come across poor business models, weak management and areas which are in decline, so this creates extra opportunities for the Reliance team.

With a starting universe of 2,000 stocks, Reliance focus on 400, using intensive company meetings to drill down to a core of around 125 companies. Being the size they are, Reliance has an extensive network of business contacts and experts, which help them analyse whole supply chains as well as the main competitors of the companies they hold.

This is a new venture for Reliance which is dipping its toe in the UK market for the first time. From what I have seen, Reliance’s existing funds in India have done extremely well and I have made a decision to dip my own toe in this fund via my wife’s Sipp.

The combination of Reliance and one of Asia’s best growth stories was enough to tempt me. I shall monitor the fund carefully over the next few months and look to cover it again in six or seven months time.

Mark Dampier is head of research at Hargreaves Lansdown


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