ASHOKA INDIA EQUITY INVESTMENT TRUST: Offers summer of opportunity

Investment trust Ashoka India Equity has just celebrated its fourth anniversary as a company listed on the London Stock Exchange. 

In terms of investment returns, it’s a job well done, with shareholders in at the launch sitting on a 75 per cent gain. 

Yet the managers believe there are more attractive returns to be made in the medium term. 

The fund, valued at £196million, is run out of Singapore and Mumbai by White Oak Capital, an investment house that specialises in Indian equities. In total, White Oak has more than £4billion under management. 

It runs Ashoka India Equity in a prescribed way. For a start, its modus operandi is built around stock picking. 

It doesn’t hold cash in the trust, nor does it adjust the portfolio to take into account a shifting economic backdrop. 

Instead, it holds companies that it believes will generate returns in any conditions. To ensure the trust does not carry undue risk, the portfolio is spread across all key sectors such as financial, consumer and IT stocks. 

It also holds a mix of companies – those dependent on the domestic economy and others that are more export orientated. 

‘The Indian stock market comprises more than 3,000 companies,’ says Ayush Abhijeet, adviser to the trust. 

‘Of those, only 1,800 have shares that are actively traded. We monitor around 800 listed companies with market capitalisations above $200million [£166million].’

Currently, the trust holds shares in 81 companies. Some are familiar names, such as IT giant Infosys and banks ICICI and HDFC. 

Others are less so. Abhijeet says that apart from India’s 200 biggest companies, investment research on stocks is limited, which means there is scope for fund managers to identify companies that are undervalued by the market. 

‘We have investment teams that concentrate on key market sectors,’ he adds. ‘It’s their job to come up with new investment ideas. These are then discussed across the sector teams and if there is a consensus opinion, we will buy or hold off. It’s a collaborative effort.’ 

As well as seeking opportunities to generate returns ahead of the market, the teams spend as much energy trying to ensure they avoid banana skins – companies that have poor corporate governance, or whose business model is threatened by technological change. 

Successful long-term holdings include chemicals company Navin Fluorine, a manufacturer of refrigeration gases. ‘We bought it at the time the trust was launched in July 2018,’ says Abhijeet. 

‘It’s increased in value sixfold and accounts for 1.5 per cent of the trust’s assets. It has been one of our most successful investments.’ 

Stocks are held on average for three years, although Abhijeet says this is more of an outcome than an objective. 

‘If a stock reaches a target price that we have set, or we believe its valuation looks bloated, we will sell and reallocate the proceeds to a new investment opportunity.’ 

Although Abhijeet acknowledges the Indian stock market could be thrown off course by rising geopolitical tensions and continued high oil prices – indeed, its share price has fallen nearly 11 per cent this year – he says there is no other equity market in the world that provides a better chance for good fund managers to outperform. 

The trust’s stock market identification code is BF50VS4 and the ticker AIE. The ongoing annual charge is 0.34 per cent. Such a fund should only represent a small slice of any investment portfolio.