The single country fund challenge

By Siddharth Poddar

Added 12th August 2016

Going international as a single emerging market country manager is a big challenge, said Praveen Jagwani, CEO of UTI International.

The single country fund challenge

“It’s a constant uphill battle as everything in investment management is backward looking – because for better or worse, investments are made according to benchmarks,” Jagwani told FSA.

And because benchmarks are based on past performance, allocations to emerging markets will remain relatively modest as emerging market performance in the past five years has been unspectacular.

“I sense kinship with a Brazilian asset manager trying to sell a Brazilian fund," he said.

Luke Ng, vice president of research for FE, added that any firm with an emerging market single country-focus will face a challenge raising capital internationally because much will depend on risk appetite.

“International investors would probably use [a single country fund] as a satellite or tactical investment rather than a core investment. Money could be going in and out of the fund depending on the investment outlook for the country.”

India hub ambition

UTI, which has both Indian equity and fixed income products, manages assets of $3.6bn, according to the firm. Currently, T Rowe Price is the single largest shareholder in the asset managment arm, UTI Asset Management, with 26% stake.

The firm has several international offices. In Singapore it has a team of 21 with a strategy to target overseas investors seeking India exposure.

Jagwani has global ambitions, however. The aim is to attract Asian and other overseas investors that want access to India but are unsure of how to do so. “We want to be the leading provider of Indian assets to the world,” he said.

No new offerings are planned, but under consideration is a move into Indian alternative assets, he said.

“We think our core platform is ready, and there isn’t much that we want to add in terms of strategy.”

Instead, the focus is on building the brand overseas. The timing may be right. India’s GDP growth exceeds that of China’s and investors have high hopes for equities and fixed income as the government continues with structural reforms. Most recently, the passage of the Goods and Services Tax bill was hailed as a landmark event for business.

According to Jagwani, his firm was one of the first to launch an Indian fixed income fund.

“When we started talking about the fund three years ago, there was no Indian fixed income fund in the UCITs space,” he said, adding that today there are over a dozen bond funds investing there. Legg Mason, Capital Group and HSBC GAM are among the firms that have India fixed income investments.

Though a single country firm faces obstacles in building a global brand, it also has advantages. Jagwani believes his firm is differentiated by specialised knowledge of the complex Indian market. Perhaps because the firm has roots as a government entity, its investment team has a particular strength in understanding Indian sovereign bonds.

“We are one of the larger bond players in the Indian market, and therefore our understanding across sovereign, public and private sector debt is reasonably strong,” Jagwani said.

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The UTI Indian Fixed Income Fund, retail class, versus the emerging markets fixed income sectors in Hong Kong and Singapore. 

 

 Rebalanced in US dollars. Source: FE

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