A start-up Australian-based specialist India investment fund is tapping the NZ market for interest as the sub-continental economic growth story gathers pace.
In New Zealand last week, Mugunthan Siva, managing director of Sydney-headquartered India Avenue Investment Management, said the firm’s Indian equity fund had just been listed on the Aegis platform with FNZ and the NZX Wealth Technologies also under consideration.
“We’re not just targeting financial planners, we also think there will be some appeal for NZ institutional investors,” Siva said.
The India Avenue Equity Fund, which has garnered about $10 million since launch in Australia last September, boasts some heavy-hitter backers including ex Macquarie Bank chief, Allan Moss, and former NSW Premier, Nick Greiner.
Siva said the Brisbane-based multi-family office, Keystone Private, has also supported India Avenue with investment funds and equity in the boutique business.
“We expect to have between $20-25 million under management by the end of the year,” he said.
All six India Avenue principals have links to ING investment management in Australia, where Siva said he helped set up an Indian-focused fund for foreign investors in 2005.
He lived in Mumbai over 2005-2008 manage the ING fund before returning to Australia as head of portfolio management for ANZ Wealth. (ANZ bought out the Australasian wealth management business of its former JV partner, ING, in 2009).
Siva said the ING experience sparked his enthusiasm to create an India-focused fund built for Australian and offshore investors.
“The fund operates under Australian regulations as a unit trust,” he said. “It has an Australian responsible entity and administrator.”
According to Siva, the Australian regulatory wrap-around – available to NZ under the trans-Tasman mutual recognition regime – gives confidence to investors hesitant about exposure to the relatively unfamiliar market.
India Avenue also retains control of underlying assets but outsources asset selection to a panel of up to four Indian-based fund managers.
“We’re just using two advisers at the moment,” Siva said. “We give them a mandate, they give us advice on stock-picks, and we implement them.”
He said there were about 40 reputable fund management firms in India with “good stock-picking talent”.
India has the largest number of listed companies in the world, Siva said, with about 5,800 stocks on display.
“Our universe is the top 1,000,” he said, with the smallest of these valued about $180 million. Currently, the India Avenue portfolio includes 51 stocks covering both large cap and mid-sized firms.
Siva said investors with exposure to India via global diversified funds miss out on the domestically-driven growth opportunities at the small-to-mid end of the market.
“Many of the large Indian companies derive a lot of their income offshore,” he said. “But small-to-mid sized companies are more exposed to the Indian middle-class consumer growth trend.”
The strongly-growing Indian economy was built on the burgeoning middle class as well as a renewed political will, under Prime Minister Modi, for reform, Siva said.
“India has had strong growth and inflation is now under control,” he said. “And it is lowly-correlated to the Australian and NZ markets.”
Despite the overall positive trends, Siva said India faced a few risks including rising commodity prices (which could induce inflation pressure in the import-reliant economy), geopolitical volatility (both local and global), and rising youth unemployment.
“If in five year’s time the most important question to ask about India’s success is what has it done about job creation,” he said.
The India Avenue fund joins a growing list of country-specific products on offer to the NZ market including from another Australian-based firm, Fiducian, and the wholesale Mauritius-domiciled Seven Rivers fund.
