Sheridan Admans, investment adviser at The Share Centre, explains how investors looking for an alternative to China-focused emerging market offerings, could benefit from the First State Indian Subcontinent fund.

 

The aim of the fund is to achieve long-term capital growth. The fund has a diversified portfolio comprising of companies from the Indian subcontinent including, India, Pakistan, Sri Lanka and Bangladesh. As such, the fund can help investors who already hold funds in Asia Pacific sectors to diversify further into emerging markets without additional exposure to China.

Over recent years we have seen India become more open to overseas investment thanks to a major financial reform. It is also experiencing an increase in domestic consumption, which the fund's manager, David Gait, believes will remain buoyant due to favourable demographics such as a growing working population.

The fund benefits from its managers and analysts being involved with the participants of Indian subcontinent markets on a daily basis. Gait manages the fund and is supported by two other managers, Singapore based Sashi Reddy and Edinburgh based Angus Tulloch, both of whom have experience of the regions.

The fund invests in approximately 40 to 60 companies favouring a blend of large, mid and small cap companies. Stocks are held for the longer term, thereby reducing portfolio turnover. Gait prefers to invest in companies that have a good management track record, competitive advantage, sustainable business models, predictable growth and low valuations.

The fund is a fairly new offering, having only turned three on 15 November. Despite this, its first three year's performance of 49.35 per cent greatly outperformed its sector return of 4.84 per cent, although the IMA Specialist sector is probably not the most accurate peer group for comparison.

Due to the nature of the geographical region and the development of their financial markets we rate this fund as a high risk investment.