Ashoka India Equity (AIE)
17/10/2024
Results analysis from Kepler Trust
Intelligence
Ashoka India Equity (AIE) has
released its annual results for the year to 30/06/2024. The net
asset value (NAV) increased by 35.5% during the 12-month period,
versus a gain of 37.7% from the MSCI India IMI, a slight
underperformance of 2.2 percentage points. The share price rose
35.9% during the same period.
The performance continues
AIE's fine returns since it was launched in 2018, with the NAV up
185% and the share price rising 184% in that time, versus a 121.5%
gain from the benchmark index - impressive long-term performance.
The company's share price at year-end stood at 284p, a 1.7% premium
to NAV.
Demand from both existing
shareholders and new investors also continued, with more than 43
million new shares issued at a small premium to the prevailing NAV,
raising a total of £107.5 million.
The portfolio remains well
diversified and balanced across both cyclical and counter-cyclical
sectors. Management believes that this helps them to consciously
avoid market timing, sector rotation and other such top-down bets.
Stylistically, AIE aims to be agnostic.
Top contributors to
performance were Azad Engineering, which makes highly engineered
precision and machined components for companies in sectors such as
defence and energy; the private sector bank ICICI; and CG Power and
Industrial Supplies, which makes railway and power transmission
products.
While there's a risk that any
sustained weakness in global growth could weigh on market
performance, the investment manager remains optimistic on the
outlook, believing that the structural growth drivers of the Indian
economy are deep rooted, making India an attractive long-term
investment opportunity.
Andrew Watkins, chairman,
said: "Conditions for investment managers to concentrate and
produce positive returns for their shareholders have not become any
easier in the last 12 months as tensions persist worldwide. Perhaps
being based in Mumbai and Singapore provides an element of shelter
from the cacophony of this rather mad world in which we all
currently reside and, if so, the high regard in which my fellow
directors and I hold the company's investment manager and adviser
grows by the day."
Kepler
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The exceptional returns that
the managers of Ashoka India Equity (AIE) have delivered since
inception have continued through its 2024 full-year, with both the
NAV and share price only narrowly underperforming the benchmark
index in the near-term.
AIE has arguably captured the
impressive growth of the India market better than peers, with its
focus on ensuring that the portfolio is not over- or under-exposed
to any one factor, including having a reasonable balance in large
caps.
In fact, AIE's 60
percentage-point outperformance of its benchmark since inception,
in our view, makes it one of the stand-out trusts across all
emerging markets.
Leading the way for active
management, much of AIE's success has come down to stock selection,
with the managers achieving a 'hit rate' of c. 65%, well above the
55% that is considered a high standard in the industry. As such, we
believe there are encouraging signs for future
performance.
The focus on small and
medium-sized businesses helps in this regard. WhiteOak's team of
highly experienced analysts are able to exploit this
under-researched space for alpha generation, therefore we believe
this should provide more opportunities for the managers going
forward.
The charging structure is
also a standout feature. The managers are only remunerated for
outperformance of the benchmark, aligning their interest fully with
shareholders. This has been further enhanced in our opinion with
the decision to use the fees to invest back into the trust, which
shows strong commitment to the long-term future of the
trust.
AIE is, in our opinion, a
risk-managed way of accessing this popular asset class with
significant alpha potential.
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