New Star Indian Equity A GBP

New Star has taken a slightly different route to Indian fund management; they have subcontracted the fund to Tata Asset Management. The Tata Group is a huge conglomerate in India, with operations in 54 countries across six continents. It accounts for 3% of India’s production and 5% of exports. Tata Asset Management is one of the fastest growing asset companies in India, managing at present $7 billion for over 2 million investors. The group already manage a number of Indian funds for Indian nationals with an impressive track record.

Tata believe they have an investment edge through their sheer depth of research and investment focus within the Indian market. They look to invest in high growth companies which are benefiting from the rapidly developing Indian economy, but are mindful of valuations and will not pay over the odds for a company even if the prospects look good.

Their focus is very much on management and the business model. Many of the holdings in the fund will be large, well established companies. Their process begins by sifting the market of over 4,000 stocks and narrowing it down to around 400 companies which fit their criteria. The 18 strong team then select their favourites to create a portfolio of 40-45 stocks from different industries and sectors giving investors a good spread of the Indian market.

I believe Tata have an exceptionally strong investment team. They are all professionally qualified with over a hundred years of market experience between them. Reassuringly Tata have a reputation for extremely high standards of business ethics and in my view would probably put quite a number of European companies to shame. Risk management is also very high on the agenda although this is a high risk fund. It is vital that investors remember that India is neither a one-way bet, nor a short term one. Investors also need to be mindful not to go overboard with their total emerging market exposure.

There are problems in India. Lack of infrastructure means that 25% of food rots before it reaches its final destination. Similarly India produces 9% less electricity than current demand and 78 million homes don’t even have electricity. Volatility should be expected and at times will be extreme, but true long term investors with cash to spare should probably view sharp falls as an opportunity to top up their investment. India also makes a good area for regular savings as during periods when the market is low you can gradually pick up units at a lower price.

I think New Star have pulled off something of a coup in securing the services of Tata, given the group’s long history contacts and experience. I would expect to see this as one of the leading Indian funds in the years to come.