India-Focused Investment Firms Among the Best in 2014
By Nishant Maddineni
Indian investment funds from the UK, U.S. and Canada have had some of the strongest performance levels of all investment funds in 2014. The positive results extend across different types of funds and include mutual funds, hedge funds and exchange traded funds.
According to investment data provider Trustnet.com, nine of the top 10 funds of the year were focused on Indian company shares. Overall, mutual funds focused in India gained 47.1 percent from January 1 to December 16, 2014.
Best Performing Funds
The strongest performing mutual fund was Matthews Asia India, which saw its value grow 62.04 percent. The Matthews Asia India fund focuses on publicly traded common stocks, preferred stocks and convertible securities of companies located in India, with 80 percent of its assets in these areas. Its strongest performance was in small- to mid-cap holdings instead of large-caps.
The second strongest performing and much larger mutual fund of the year was the Goldman Sachs India fund, which had a 49.9 percent increase in its valuation in 2014. Its total net assets are now at US$816 billion, with the vast majority (98.2 percent) of its assets in equity. Other strong performing mutual funds include Jupiter India, First State India Subcontinent and Franklin India, with growth rates of 49 percent, 48.2 percent and 46.6 percent respectively.
Investment funds from other countries in 2014 also did well on India stocks. One example is the Excel India Fund, which is the largest and longest-running mutual fund in Canada solely focused on investing in India. The Excel India fund is the best performing mutual fund in Canada as of November 30th, 2014.
India-focused hedge funds had strong returns this year, with a net increase of 41.9 percent. From January to October, Indian hedge funds offered a 36.4 percent return which exceeded even the BSE benchmark Sensex index return of 29.2 percent. BSE Sensex is the market-weighted stock market index of 30 well-established and financially sound companies on the Bombay Stock Exchange.
Investment trusts with closed-end funds also did very well when they had large Indian holdings. According to data from the Associate of Investment Companies (AIC), which is the trade body for closed-ended investment companies, some of the best trusts were India focused investment trusts. The top performing one for 2014 was the India Capital Growth with a 71 percent growth rate, followed by the New India Investment Trust (up 59 percent) and JP Morgan Indian (up 57 percent).
Finally, India-focused exchange traded funds dominated the list of best performing ETFs, with small cap stocks performing best. The iShares MSCI India Small-Cap ETF was up almost 60 percent in 2014, and EGShares India Small Cap ETF and the Market Vectors India Small-Cap ETF followed close behind.
Reasons for Investment Growth
The strong performance of the investment funds can be partly attributed to economic reform and growth under Prime Minister Narendra Modi. Modi is a pro-business politician and has come out with a big reform agenda. Many important bills, including the Insurance Bill and an amendment to the Land Acquisition Bill, are expected to be passed soon. Changes are also expected in India’s notorious bureaucracy that, if implemented, could allow for faster decision-making.
However, with most of the reforms yet to be fully implemented, 2014’s strong growth is primarily the result of investor optimism. That a lot of the reforms haven’t come into effect also explains why Matthews India Fund has seen its better growth in the secular growth sectors, such as consumer goods, pharmaceuticals and technology services, as opposed to the reform dependent sectors like public sector banks or infrastructure companies.
The reforms the market is waiting for are in land, labor, agriculture and taxation. That being said, macroeconomic fundamentals like inflation and industrial growth have improved partly due to the better executive efficiency of the new government, which has helped smaller companies more than larger ones.
There are still positive signs for the Indian economy, such as the small steps related to bureaucratic accountability and governance. If these reforms lead to more important reforms being passed, the strong return on Indian investments could continue in 2015.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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