New fund eyes India’s infrastructure, demographics

WASHINGTON — Investment opportunities in India are on the rise, as experts predict that the country’s potential lies well beyond customer call centers. Greenwich (Conn.) Advisors LLC recently created an open-end fund that will invest in 25 to 40 Indian companies in a range of industries, including software, banking, infrastructure, retail, pharmaceuticals and real estate.

WASHINGTON — Investment opportunities in India are on the rise, as experts predict that the country’s potential lies well beyond customer call centers.
Greenwich (Conn.) Advisors LLC recently created an open-end fund that will invest in 25 to 40 Indian companies in a range of industries, including software, banking, infrastructure, retail, pharmaceuticals and real estate.
The firm chose India as the focus for the first of several planned emerging-markets investment products, because its leaders say that the Southeast Asian nation is positioned for economic expansion.
“India is like the United States in the 1950s” in terms of its infrastructure plans, including new highways, airports, power plants, roads and buildings, said Suhas Kundapoor, managing director and portfolio director of Greenwich Advisors.
He also said that India has a young population, much like the United States did in the 1960s.
In fact, India’s economy is growing at about 9% a year, according to the Indian government. The expansion is a result of that country’s liberalization of trade and investment laws over the past 15 years.
Foreign direct investment in India increased to $15.7 billion last year, from $5.5 billion in 2005, according to India’s government. A total of $54.6 billion of foreign direct investment has flowed into the country since 1991.
The Greenwich Advisors India Select Fund joins a small group of funds invested solely in India, according to Morningstar Inc. of Chicago.
India “has been red hot,” said Morningstar senior analyst Bill Rocco.
Eaton Vance Greater India Fund (ETGIX), started in May 1994 by Eaton Vance Corp. of Boston, and Matthews India Fund (MINDX), created in October 2005 by Matthews International Capital Management LLC of San Francisco, returned 17% and 22%, respectively, for the one-year period ended July 31. That compares with a 14% return for the Standard & Poor’s 500 stock index. The two funds have about $2 billion in net assets, according to Morningstar.
Meanwhile, exchange traded fund iPath MSCI India Index ETN (INP), offered by Barclays PLC of London, had returned about 21% since its creation in December through last Monday. Even though these funds have done “quite well,” however, most individual investors shouldn’t be in these funds, Mr. Rocco said.
“Single-country emerging-market funds are extremely risky,” he said. “There is a lot of interest in these funds, but they are very specialized, and not where most people should be.”
Instead, Mr. Rocco suggests that individual investors seek global exposure with a core international fund, something like a large-capitalization fund with broad exposure to the world. Further international exposure could include going to emerging markets or to small companies in developed markets, he said.
An emerging-markets fund where the manager has the whole emerging world as an investment purview would be safer than a single-country or even regional fund, Mr. Rocco said.
Emerging markets in general are very heavy in certain sectors, such as energy and telecommunications, he said. “When you narrow the geographic profile, the risk increases,” Mr. Rocco added.
At Wescott Financial Advisory Group LLC in Philadelphia, which manages about $1 billion, financial advisers recommend that 40% of client assets be exposed to international markets. This is double the amount in international investments three years ago, as the firm sought to represent global market capitalization better within client portfolios, said Lydia Sheckels, Wescott’s chief investment officer.
The drivers for growth in the global economy are happening at a faster pace outside the United States, for example in emerging markets such as China and India, she said.
Wescott invests its client assets in emerging-markets portfolios but not country-specific funds.
“We depend on managers to find opportunities to invest in companies that benefit from the trends in India and China, regardless of where they are domiciled,” Ms. Sheckels said.
The Greenwich Advisors India Select Fund won’t be like other emerging-country investments, because it will invest in many of India’s sectors, not just a few strong industries, Mr. Kundapoor said. “With an investment in India, you’re not just buying information technology, financials or energy,” he said.
Additionally, Greenwich Advisors is teaming with State Bank of India Funds Management Private Ltd. of Mumbai, which will provide on-the-ground research of Indian companies. There are about 6,000 listed stocks in that country.
“Our team in India gives us the unique ability to identify investment opportunities among Indian companies with high growth potential and the ability to better adapt our portfolio to take advantage of market developments.” Mr. Kundapoor said.