Jupiter India: April 2020 fund update

Kate Marshall | Tue 28 April 2020

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• India's economy is undergoing historic change, which presents exciting opportunities for businesses and investors
• This fund is run by one of few managers with a long record of investing in India
• We are impressed with the manager's commitment to investing in India and willingness to invest in areas overlooked by others

How it fits in a portfolio

This fund focuses on the Indian stock market, with a bias towards smaller companies. We think India has excellent long-term growth potential, though a fund focused on a single emerging country is a high-risk option so it should only make up a small portion of an investment portfolio. This fund could sit well alongside those that invest across the globe or more broadly across Asia. Investments in smaller companies could boost growth but are also higher risk, so a long investment outlook is essential.

Manager

Avinash Vazirani has plenty of experience investing in Indian companies. He started his fund management career in 1995 when he set up his first Indian fund. In 2007 he joined Jupiter and launched the Jupiter India fund. A primary focus on a single country for such a long period of time provides the manager with in depth and unrivalled knowledge of Indian companies, the economy, and the themes set to develop over the coming years. We admire his commitment to the asset class.

Vazirani has the support of assistant fund manager Aimee Truesdale, who also dedicates her time to Indian equity analysis. They also collaborate with Jupiter's broader global emerging markets team in order to discuss ideas and gain additional input.

Vazirani has an in depth knowledge of the Indian market and economy, and we view this as one of his greatest strengths. He focuses solely on investing in Indian companies, while taking into account broader market trends. He now also has the support of an assistant fund manager to help generate ideas for the portfolio and raise discussion points.

Process

The managers use a GARP (Growth at a Reasonable Price) investment philosophy. This means they look for companies that grow their earnings consistently, and whose shares can be bought at a price that doesn't reflect this earnings potential. Once this potential is recognised by more investors, the share price could rise.

Detailed research is used to find companies that meet the managers' criteria. These businesses should generate good cash flows, have low debts, have something that differentiates them from the competition, and be run by a committed management team. Longer-term trends that could shape India's economy and how businesses operate are also taken into account. For example, the rising spending power of a growing middle class and political reforms that could help businesses function more efficiently and grow.

The managers also take regular trips to India to meet company management, other business people, and government officials. This helps them gain a broad understanding of the economy and specific industries.

This fund invests in Indian companies of any size, but it focuses more on small and medium-sized companies than many other India funds. Vazirani is also prepared to invest a meaningful amount of the fund in his highest-conviction ideas. Both of these factors means the fund can look quite different to its benchmark and peers, and so too can performance.

Culture

We like Vazirani's willingness to think differently to a lot of other managers who invest in India. The culture at Jupiter allows him the freedom to invest in the way he thinks will benefit investors most over the long run, but with an appropriate level of challenge from others in the business. The business setup also allows him to focus purely on fund management and maintain flexibility. We think the way he's incentivised should encourage him to maximise growth over the long run and aligns his interests with investors.

Cost

This fund is available at an ongoing charge of 0.69%, after a 0.36% discount available through the HL platform. We think this is a great price for a fund that invests in a specialist area of the market, particularly in a single emerging country where costs can be higher. The HL platform fee of up to 0.45% per year also applies.

Performance

Vazirani has delivered strong returns for investors since his fund management career began more than two decades ago. Long-term performance of Jupiter India has also been good, with the fund growing 65.5%* since its launch in 2008, compared with 52.9% for the FTSE India Index. Please remember past performance isn't a guide to future returns.

Our analysis shows the fund's focus on small and medium-sized companies has helped performance over the long term. However, since the start of 2018 the share prices of smaller businesses have been much weaker than larger ones and this has hurt the fund. Some of the manager's individual stock picks also haven't gone well over this time.

This has been a painful period for investors, but this is a relatively short timeframe and we believe it pays to be patient when it comes to investing. We expect the focus on smaller companies to boost long-term growth, but it's important to note it increases volatility and risk, and so does the fact the fund invests in a single emerging country. Investors should therefore be prepared to see the fund perform quite differently to the broader Indian stock market and its peers, especially over shorter periods.

Overall, we like the fact Jupiter India invests differently. This gives it the potential to perform better than the Indian market, as it has done over longer periods, though the reverse is also true. Over the long run we think Vazirani has been successful in identifying companies with strong growth prospects, which have often been overlooked by other investors. There are of course no guarantees and like all investments, the fund will fall as well as rise in value so investors could get back less than they invest.

Past performance is not a guide to the future. Source: *Lipper IM to 31/03/2020.

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Key investor information