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New Indian fund to list
John Wilkinson
A new Indian fund is being launched later this month as a listed investment company (LIC) on the ASX.
The Indian Equities Fund is in the process of being registered with the Australian Securities and Investments Commission, said chief executive officer John Pereira.
Melbourne-based Olympus Funds Management will administer the fund in Australia, but major Indian financial services company Kotak Mahindra will handle the investment strategy.
“There are a lot of people who want exposure to Indian equities, both retail and institutional, but traditionally it has been very difficult to invest directly,” Pereira said.
“We decided to choose an (Indian) internal investment manager, which was Kotak, to overcome these difficulties.”
Pereira said when his company was looking at Indian managers they wanted somebody with international experience. Kotak worked in joint ventures with Goldman Sachs until 2006.
“We wanted a good track record of joint ventures and good investment performance,” he said.
The investment style of the fund will be conservative, with 80 per cent of the portfolio invested in blue chip stocks.
The remaining investment will be in mid-cap stocks to provide some growth for the fund.
“These mid-cap stocks will deliver good results, and many of them grow into large cap stocks,” he said.
Australian LICs have not been popular investment choices since many delivered mediocre returns a few years ago.
Pereira said he looked at two LICs listed on the New York Stock Exchange and looked at how they had achieved good investor returns.
“I looked at Blackstone and Morgan Stanley, and these LICs traded at a 99 per cent premium over a 10-year period,” he said.
“To make this fund attractive to investors, we will offer a stapled option with each share and offer a buy-back of shares if the fund falls 10 per cent below the benchmark.”
Pereira said these two features were a direct response to concerns financial planners had about the performance of the fund.
“We will also offer a dividend re-investment plan to encourage investors to stay in the fund long-term,” he said.
1 March 2007
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