This India-focused fund beating 98% of peers targets crisis winners

One of the best performing India-focused equity funds is buying stock in companies that are poised to increase their market share in the wake of the pandemic.

Investing in companies that have an “indisputable competitive advantage” and high quality management has been the key, according to Elizabeth Soon, a fund manager at Hong Kong-based Pinebridge Investments Asia Ltd. “When there is a crisis like the one we’re in now, such companies are able to strengthen their position in their respective industries,” Soon said.

Soon’s $558 million PineBridge India Equity Fund beat 98% of its peers in the last 12 months, Bloomberg data show. Furthermore, its 8.7% return so far this year makes it the only one of 40 India-focused funds with at least $200 million in assets under management with a positive return.

According to the fund’s profile, its top holding as of July 31 was drugmaker Divi’s Laboratories Ltd., which has gained more than 70% in 2020. Indian information technology companies, which have been the third best performing industry group this year, are also among the top holdings, Soon said.

“India not just supplied essential medicines, but also took care of global technology needs,” said Soon, “There was no playbook for this, yet when faced with a crisis of this magnitude, Indian IT companies delivered flawlessly.”

Soon focuses on company-specific attributes rather than investing across industry groups. She hunts for firms with access to low-cost capital, strong balance sheets, and with a “stock price that doesn’t fully capture the opportunities available for it to capture profitably.”

Here are some more comments from Elizabeth Soon:

Generally, expensive stocks fall the most when there is a crisis. That hasn’t happened this time around, which needs deeper study.

Consumer confidence data is the biggest overlooked threat to Indian equities. Greater consumer spending is needed for capacity utilisation to pick up, which in turn would lead to more investment.

To mitigate the economic impact of the coronavirus pandemic, India needs to attract global capital to invest in infrastructure and could also raise funds by sell more shares in state-owned enterprises.