TIDMAIE
Ashoka India Equity Investment Tst
10 October 2023
Ashoka India Equity (AIE)
10/10/2023
Results analysis from Kepler Trust Intelligence
Ashoka India Equity (AIE) has released its results for the year
ending 30/06/2023. The trust delivered strong outperformance with
NAV and share price total returns in sterling terms of 19.4% and
18.3% respectively, compared to equivalent returns of 11.8% in the
trust's benchmark, the India Investable Market Index.
Key contributors to performance included vehicle and affordable
homes lender Cholamandalam Investment and Finance, as well as ICICI
Bank. Electronics manufacturing group Kaynes Technology was also a
key contributor to performance.
The managers built on an already impressive track record last
year. From inception through to the period end, AIE delivered NAV
total returns of 110.4% and share price total returns of 109%, both
in sterling terms. That represented substantial outperformance
relative to the equivalent returns of 60.9% delivered by the
benchmark over the same period.
Kepler View
Since launching in 2018, Ashoka India Equity (AIE) has been the
top performing country specialist investment trust focused on
India. Last year saw the trust managers build on that impressive
track record, with another period of substantial absolute and
relative outperformance, something they have also continued in the
short period of time since the end of June.
We think the trust offers investors one of the most closely
aligned incentive structures in the closed-ended fund sector today.
The managers are paid solely on outperformance they deliver over
three year periods. The fee, which is 30% of any excess returns, is
capped at 12% of the average net assets over those periods. Fees
are also paid in shares, with half locked up for an additional
three years.
This structure essentially means that the managers can only get
paid if they deliver outperformance for shareholders and, to
maximise their own returns, they have to do so over a six-year
period, meaning there is a meaningful incentive for the managers to
produce long-term returns for their shareholders.
The managers also pay careful attention to valuations and have
developed their own proprietary cash flow valuation system. They
also hold thousands of meetings per year and place a strong
emphasis on corporate governance. This is important in any market,
but we arguably saw the benefits of this approach earlier this
year, as AIE held none of the companies that were hit by a scandal
involving the Adani Group.
Combined, we think these factors make AIE an attractive way to
access the Indian equity market. As one manager at another trust
noted at Kepler's emerging markets event in June of this year, he
has never been so upbeat about India as he is today.
We believe that is warranted. Indian GDP growth continues to be
strong. The country is benefitting from firms moving manufacturing
away from China, as well as the government's 'Made in India' which
is designed to foster exactly those sorts of developments. In
absolute terms, India produces more STEM graduates than any country
on earth and the country's burgeoning technology industry can be
seen clearly in the AIE portfolio.
The trust's track record is not a guarantee of future returns.
However, we think anyone looking to take an active approach to
investing in India is likely to find the trust's aligned fee
structure and the strength of its analyst team appealing.
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