Type: Unit trust
Aim: Growth by investing in companies trading or based in India
Minimum investment: Lump sum £500, monthly £50
Investment split: 100% in companies trading or based in India
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5.75%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 020 7314 7600
Jupiter’s India fund aims for growth by investing in 50-60 companies that are based in or trade in India.
Assessing India’s growth prospects, Hargreaves Lansdown senior analyst Meera Patel says: “The growth story behind India is compelling. It is now the fourth largest economy in the world and it has one of the best demographics with 25 per cent of the world’s youth – the under 25s –living in India. It is precisely this young and highly educated workforce that is driving domestic consumption, which forms the bedrock of the Indian economy.
“Growth in India is emanating from a number of sectors spanning across its agriculture to manufacturing and services. Around $500 bn is being pumped into India’s infrastructure projects over the next five years. which should continue to fuel growth. Roads, railways and telecoms networks will be the biggest beneficiaries of this investment.” says Patel. She adds that India is well positioned to weather a downturn in the West. “Its exports account for 13 per cent of overall growth, making it somewhat immune to an economic slowdown.”
Patel thinks that Jupiter has a reputable brand name and she does not believe it would launch a fund unless it genuinely thought it would offer investors a great investment opportunity. She observes that the fund is clearly high risk, but it will be fairly orientated towards bigger companies to ensure liquidity. “This should help mitigate some risk by avoiding some of the racier smaller companies, although it will be fairly concentrated, with around 50 holdings,” she says.
The fund is managed by Avinash Vazirani, who has a 12-year continuous track record managing an Indian fund. “He still manages that fund while at Jupiter and it has delivered exceptional returns. This is commendable given the lack of managers available to UK investors with this length of track record in the Indian equity market,” says Patel.
In her view, many specialist fund managers tend to think they can charge a higher annual management fee of at least 1.75 per cent simply because the fund is specialist. “This one charges 1.5 per cent, so I am pleased Jupiter is sticking to what we consider the industry norm in terms of an annual management charge rather than trying to be too greedy with the charges,” says Patel.
As this is specialist by nature, Patel believes investors should consider a broader emerging markets fund to begin with. “They can then consider a fund like this if they are prepared to put up with the additional risk and volatility. However satellite funds like this should not make up more than 5-10 per cent of an overall portfolio depending on the individual’s circumstances and risk tolerance.
“For some investors, a regular savings into a higher risk fund like this could be a viable option, particularly during periods of volatility where investors can benefit from pound cost averaging,” she says.
Discussing the potential drawbacks of this fund Patel says: “Quite frankly there is little I don’t like about this product. All I could say is that India has seen some phenomenal growth and valuations are not amongst the cheapest around the world. Having said this, the strong growth and high return on equity that many companies offer means their valuations could be arguably justified.”
Other than that, Patel notes that investors need to appreciate that markets like India can be subject to a high degree of volatility during periods of uncertainty or a domestic economic slowdown, but if they are prepared to put up with the volatility, the long term prospects are excellent.
Scanning the market for potential competitors Patel says: “The main competition would be the HSBC GIF Indian equity, First State Indian subcontinent, Fidelity India focus and the Neptune India. There are other India funds available but I see these as the main competition with the UK retail market.
Summing up, Patel says: “Given the growth story behind India, coupled with an experienced manager and a solid proposition, we have included the Jupiter India fund onto our Wealth 150, a list of our favourite funds in each sector.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average