In April 2018, Ocean Dial Asset Management, in London, launched the Ocean Dial Emerging India Fund, a daily priced, weekly dealing sub-fund of its Irish regulated UCITS, Open Ended Investment Company. The Fund portfolio invests in listed Indian equities, long only.
The Fund has initial committed investment capital of USD 35 million.
The investment strategy is focused on delivering capital appreciation for investors over the medium to long-term, with a strong bias towards capital preservation by investing in a portfolio of listed Indian stocks. The portfolio contains a moderately concentrated portfolio of companies focusing on market capitalization levels of USD 5 billion and below and sticking to areas of the economy that are well known and understood.
Economic background - The first wave of structural reform to hit India took place in the early 1990’s, opening up the economy to competitive forces, reducing the role of the Government and liberalizing the capital markets.
The subsequent wave is currently 'in train' and follows the 'taper tantrum' of 2013 and Prime Minister Narendra Modi’s landslide victory in the 2014 General Election. Rapid change across multiple sectors is being accelerated by the IT revolution, of which India leads the vanguard.
Yet in spite of this rapid pace of change, India remains a highly inefficient economy. As a consequence, Ocean Dial envisages high and relatively stable growth over the next 10 years, as the reform process gathers pace, the regulatory environment adapts and productivity flourishes; all in a structurally 'lower cost of capital' environment. This transformation is feeding a dynamic commercial environment, wherein a variety of new businesses and investment themes are emerging, and many legacy enterprises are rapidly adapting.
Investment Philosophy - The investment philosophy underpinning the Emerging India Fund, is to identify and invest in the new breed of entrepreneurs and 'next generation' companies, whilst maintaining strict adherence to an already proven investment process.
The following areas of interest have been identified:
- Identifying companies that will benefit from steady growth in consumption - food processing (dairy, food retailing, beverages), entertainment sector (multiplex cinemas, gyms and theme parks), education and vocational training.
- Ongoing intermediation of financial services to a broader section of society- digital economy, micro-lending and non-banking finance, stock and commodity exchanges.
- Recognising businesses which are enabling and benefitting from a transition to a more sustainable economy, and as such seeing consistent and profitable growth- renewable energy, water treatment and waste management.
- Tomorrow’s leaders; due to a lower cost of capital, more pragmatic regulation, and development of IT, opportunities to emulate current market leaders on profitability parameters in specific sectors are emerging.
- Niche businesses in old economy sectors who are already, or can become, global leaders, specifically in sectors such as chemicals, textiles and industrial consumables.