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Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by abrdn. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

Aberdeen New India’s (ANII) managers, Kristy Fong and James Thom, take a highly-active approach to investing in India. Company and sector allocations can have large deviations from the benchmark, in order to attempt to generate alpha. Kristy and James are bottom-up stock pickers and select companies through a fundamentals-based assessment, looking for those stocks which offer strong long-term growth prospects, whilst placing a strong emphasis on ESG issues.

One of the important drivers of portfolio performance has been the team’s avoidance of investing in the Adani group of companies, as well as Reliance Industries, the largest listed company in India. In the team’s view, the Adani companies pose many ESG risks, in particular the excess leverage they carry and the quality of their accounting, while Reliance Industries’ treatment of minority shareholders is problematic. Not owning either group of companies, both of which have performed strongly in recent years, has contributed to the portfolio’s underperformance over the medium term (see Performance section). However, we would argue that the recent publication of a damning report on Adani may vindicate the team’s view and portfolio positioning.

2023 has started off relatively weak for India, as China’s reopening diverts some global investors’ attention. However, the team believe that India should remain as the fastest-growing major economy, at least over the short to medium term. They believe in the numerous long-term structural drivers of growth, such as rising incomes and consumerisation, and have taken overweight exposures to sectors likely to benefit, such as financials and healthcare.

ANII trades at a wide discount and the board has been active in buying back shares at around the 20% level (see Discount section). Given ANII’s growth objective, it does not pay a dividend and the managers use a modest level of gearing of approximately 10%. Its latest OCF is 1.06%.

Analyst's View

We share the team’s optimism about India, a country with a vast and growing market supported by several long-term structural tailwinds, such as a growing population with rising incomes and business-friendly tax and legal reforms. Also, as multinationals look to mitigate political risks associated with China by relocating plants elsewhere, it presents India with huge opportunities to attract inward investment, given its skilled and low-cost labour force.

The poor outcome for investors in the Adani companies highlights the importance of a strong focus on corporate governance in India, which has long been a strength of the abrdn team. We think it adds to the attractions of an investment in ANII and avoiding the blow-up reflects well on the team, even if a lack of exposure has led the portfolio to lag in the past.

ANII’s performance has fallen short of the MSCI India Index over the last 2 years. The lack of exposure to Adani and Reliance have been key reasons, but the market’s rotation towards value stocks has also hurt relative returns. We believe the quality tilt of the portfolio should make it more resilient in down markets and serve investors well over the long term, through its growth focus. However, the team acknowledge the performance shortfall and are taking measures to improve it going forward. These include exiting low-conviction stocks and adding to quality names that have sold off, as well as increasing the portfolio’s resilience to inflation.

Bull

  • Avoids investing in stocks with questionable ESG issues and quality of accounting
  • Bias towards quality provides defensive characteristics
  • Trades at a wide discount, presenting entry opportunities

Bear

  • As a single-country emerging market fund, it has higher political risk and volatility
  • Has underperformed over the medium and short term
  • Gearing can enhance downside losses
Continue to Portfolio

Fund History

27 Feb 2024 Fund Analysis
ANII outperformed the MSCI India benchmark in 2023…
04 Aug 2023 Investing in Indian stocks, with ANII Manager Kristy Fong - Podcast: Trust Issues #20
We talk high valuations, the upcoming election, and corporate governance...
28 Jul 2023 Fund Analysis
ANII’s wide discount may present an attractive entry point…
03 Mar 2023 Fund Analysis
ANII’s wide discount may present an attractive entry point…
15 Sep 2022 Same same but different
We discuss the case for emerging markets at different stages of development…
03 Aug 2022 Fund Analysis
High quality Indian companies at a discount...
30 Mar 2022 You say tomato…
Do it yourself or put it into a global fund and leave it to the experts - our analyst debate the merits of each approach...
01 Feb 2022 Fund Analysis
ANII aims to invest in world-class, well governed companies at the heart of India’s growth…
13 Oct 2021 Beyond the Middle Kingdom
As momentum falters in the emerging markets powerhouse, we examine the options for investors outside China...
28 Jul 2021 Fund Analysis
ANII offers exposure to exciting growth stories in India…
21 Jan 2021 Fund Analysis
ANII is the top-performing India trust over five years…
07 Oct 2020 Five ways to play Indian equities
India is struggling economically – but could there be a value opportunity in the stock market?
09 Sep 2020 Fund Analysis
ANII’s quality characteristics could stand it in good stead in a weak economic period…
05 Mar 2020 Don't panic: the case for investing in Asia this ISA season
We examine the relationship between stock market and GDP growth, before debating the case for an allocation to Asia...
26 Feb 2020 Fund Analysis
ANII is the top-performing Indian trust over the last five years…
16 Jan 2020 Drifting apart: how emerging markets have become less correlated
We examine how correlations between different emerging markets have evolved, and whether single country strategies could diversify returns going forward....
28 Aug 2019 Quality street: can the dominant style continue to outperform?
For several years, quality as an investing style has dominated, outperforming both value and growth. We examine why the case for quality remains strong and the importance of taking an active approach…
20 Aug 2019 Fund Analysis
Aberdeen New India buys high quality stocks exposed to the fast-growing Indian economy….
12 Dec 2018 Fund Analysis
The trust has outperformed the market handsomely over the past five years thanks to strong stock selection...
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