Lack of interest forces groups to mothball India funds
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Fidelity International, Kotak Mahindra UK and New Horizon Investments have all postponed launch plans for their India investment trusts, suggesting that they have failed to generate appetite among investors.
According to several brokers, Fidelity has tried to generate interest for its Fidelity India Special Situations fund, a concept that was first considered at the end of last year.
Fidelity says the Indian market offers more stocks than almost any other, except for America. It estimates there are close to 5,000 listed companies, 1,500 of which can be invested in.
In January, representatives of Peel Hunt and New Horizon Investments, also went to see managers to discuss launching a New Horizon India Opportunities fund.
Guy Wiehahn, a director of Peel Hunt, says they decided not to proceed owing to a lack of demand.
More specialist Indian offerings have also failed to attract sufficient interest. In particular, Kotak Mahindra UK has postponed the launch of its listed Kotak India Infrastructure fund. It has failed to meet the requirement under the listings rules that means at least 25% of the company’s shares must be held in public hands.
There are already three India investment trusts focusing on equities and at least eight trusts investing in property or private equity.
Charles Cade, the head of investment companies research at Numis Securities, says investors are concerned with India’s high inflation and political instability, which he says will increase after last week’s bombings in Mumbai. Although Cade expects more specialist launches, he says his clients have shown less interest in emerging markets.
There are also a few investment trusts that are trading at wide discounts, suggesting that their shares have been less popular in recent months.
“Macroeconomic concerns are weighing on India at the moment, and it is probably the case that an Indian investment trust would trade at a discount in normal times,” says Stephen Peters, an investment analyst at Charles Stanley.
India investment trusts have not performed too badly. The net value of the New India trust’s assets, for instance, has outperformed the MSCI India index by about five percentage points over the year to date, Peters says.
The recent trends suggest that investors understand India’s potential in the long term, but remain concerned about its volatile economy and stockmarket.
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