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Ashburton’s Chindia Fund vindicates investment in emerging markets

03 December 2009 Ashburton
Jonathan Schiessl, Investment Manager, Ashburton Chindia Equity Fund

Jonathan Schiessl, Investment Manager, Ashburton Chindia Equity Fund

This month Ashburton celebrates the three year anniversary of its Chindia Equity Fund. The Fund was the first retail fund to focus solely on Chinese and Indian markets, with a mandate to achieve long-term capital growth through equity or equity related investments predominantly in the stock markets of China and India.

The Fund, which is actively managed on an unconstrained relative return basis, has achieved a growth of 69.73% for the year to 30 November 2009, with approximately $115m under management.

“When we launched the Fund there was a great deal of scepticism amongst institutional investors about the concept of putting China and India together, as well as around the idea of decoupling in general,” says Jonathan Schiessl, Investment Manager, Ashburton Chindia Equity Fund.

The 2008 market collapse made the argument for decoupling harder for those who were in support of emerging markets as an investment destination. However, says Schiessl, “The financial crisis has, in my opinion, been a ‘good’ crisis from the developing world’s perspective, and the performance of most developing economies has been nothing short of remarkable. Thus, the concept of China and India together has been vindicated, which has been reflected in the fact we have begun to see some institutional flows.”

Experts predict that this year China and India will register a GDP growth of approximately 8% and 6.5% respectively. Schiessl attributes this growth to the fact that China and India both have strong and stable governments which are focused on progress and reform. Consequently, investors are comforted by the fact that they are backed by the world’s most liquid financial institution (The People’s Bank of China and its 2 trillion dollars of foreign exchange reserves), and arguably the world’s most savvy Central Bank in the form of the Reserve Bank of India.

In addition, both countries have the advantage of long-term structural drivers such as demographics, urbanisation and an emerging middle class with the ability and willingness to spend, as well as fantastic opportunities in the areas of agriculture, education, financial services, property and retail.

However, Schiessl cautions that just like any bull markets there will be bumps along the way, as each government attempts to build a balance between social, economic and political stability. “Even though China and India's economies do appear to have decoupled to some extent, their stock markets are still liable to external shocks. With this said, we still believe that the two will continue to perform better than consensus estimates.”

ASHBURTON CHINDIA EQUITY FUND FACTS

· The Fund launched on 1 December 2006 and is managed by Jonathan Schiessl and Craig Farley.

· The Fund, which is actively managed on an unconstrained relative return basis, has achieved a growth of 6.39% since launch (as at 30 November 2009), with approximately $115m under management. This compares to the MSCI World $ Index return of -21% for the same period.

· The Fund aims to achieve long-term capital growth through equity or equity related investments predominantly in the stock markets of China and India.

· The Fund is truly actively managed and is not constrained by a benchmark. It focuses on the quality and attractiveness of individual companies rather than the outlook for particular markets. No market-cap bias is employed and stock liquidity is an overriding factor in selection.

· The Fund also invests in companies traded in other markets where a significant proportion of growth in their underlying business is set to derive from China or India.

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