Launched in February 2008, the £127m Jupiter India fund has significantly outperformed its peers in the IMA Specialist sector over the past year, up 100.4% to January 11, compared to the sector average of 40.4%.
The fund aims to achieve long-term capital growth by investing primarily in companies which operate or reside in India. It also invests in companies based in Pakistan, Sri Lanka and Bangladesh and in countries which derive a significant proportion of business from or within India.
The manager only enters into derivative transactions for the purpose of efficient management of the portfolio and not for investment.
Avinash Vazirani has managed the fund since launch, having joined Jupiter in 2007 where he is head of the firm’s South Asia equities team. He has also managed the Jupiter India Select Sicav fund – with asset rolled over from Peninsular South Asia Access fund – since its launch in July 1995.
He describes himself as a bottom-up, pragmatic, ‘GARP’- style investor (Growth at a Reasonable Price). While he is very price conscious, he is willing to pay a higher multiple for a stock if the earnings growth is high enough to more than compensate for this.
He aims to identify stocks where there are strong growth prospects which have not been priced fully by the market. The manager also invests in deep value stocks where he feels there is a catalyst for a re-rating.
He says: “With over 7,000 quoted companies in India there are many opportunities for patient investors to buy high growth businesses at attractive prices.
“India is also a very under-researched market characterised by modest analyst coverage, so there are many strong businesses, often with surprisingly large market caps, that receive less attention than they might elsewhere.
“This makes it an excellent market for stockpickers. I am a high-conviction investor, happy to build up large positions and run with them for a long time, so long as I consider their growth prospects to be not fully reflected in the market.”
Comparisons
Although Jupiter India sits in the IMA Specialist sector, Vazirani prefers to be compared with other India equity funds.
“The Specialist IMA sector has got a huge number of vehicles, which have nothing to do with our market so the right comparison would be with funds within our sector,” he says.
There are only two other India funds in the IMA Specialist sector – First State Indian Subcontinent and Neptune India, which over 12 months have underperformed Jupiter India with gains of 96.5% and 84.4% respectively.
The manager believes Jupiter India’s strong performance is because he is not an index tracker.
He says: “Essentially after we launched there was quite a bit of selling going on in the market. There were a lot of index stocks which were being sold – in fact a whole range of stuff was being sold.
“I have been managing Indian equities now for over 15 years – 14 and a half years with one particular fund, which is now the Jupiter Indian Sicav – and in virtually all down periods, apart from one, the fund has outperformed. This has been essentially because of stock selection.”
The companies he chooses to invest in are characterised by high growth.
“Even last year our companies grew their profits quite handsomely, in excess of 20%,”
he says.
“We have companies which we believe have good management and governance. We believe we have identified longer-term trends correctly and we believe we had reasonable valuations within our portfolio. So when it came to overall selling we were less affected than other funds.”
The fund has been structurally overweight in consumer goods since launch, and it remains the second largest weighting, accounting for 16.9% of the fund’s exposure at 31 October, because the manager believes in the overall India growth story.
He says: “I believe there is good macro growth for the next 20 to 25 years determined by a whole range of factors, principally demographics – younger people getting jobs, spending money, buying houses and saving.
“And most of the growth story in India is the domestic growth story, which is why I have been focusing on domestic consumers because it has been a very good sector in the past and will continue to be so.”
While the success of the consumer sector has been the main driver of performance over the past 12 months, Vazirani says financials – the largest sector in the fund at 26.1% – and utilities, at 4.5%, were also big contributors to performance.
Vazirani says his investment style means he will always be underweight companies or sectors which are not in control of their destiny.
“What do I mean by that? I mean I will always be underweight sectors such as commodities, unless there is specific trigger stuff like oil and gas,” he says.
“I like to invest in companies which either succeed or fail because of what they do rather than what the market does.”
