If one can make the case for investing in a dedicated India fund, then the Matthews India Investor Fund Ticker:(MINDX), managed by Sharat Shroff, might be a good one to pick.
Of the nine registered mutual funds concentrated in Indian companies, the $1.1 billion Matthews fund is a no-brainer, according to Bill Rocco, analyst at Morningstar Inc.
“Matthews [International Capital Management] is one of the best and they do Asia very well,” he said. “And I think highly of Sharat, because he has produced some good results.”
The fund, which was launched in 2005, gained 32.5% last year, ranking it fourth among all emerging-markets mutual funds.
As a pure-India play, the only fund with more tenure is the $706 million Eaton Vance Greater India Fund Ticker:(ETGIX), which has been around since 1994.
Mr. Shroff, 38, started working on the India fund as an analyst in 2005, was promoted to co-manager in 2006 along with Andrew Foster, and in 2009, he became the lead manager of the fund.
He is also co-manager of the $5.5 billion Matthews Pacific Tiger Investor Fund Ticker:(MAPTX), along with Richard Gao.
Born, raised and educated in India, Mr. Shroff has been working in the United States for nearly a decade, but he still spends a lot of time traveling to Asia for research.
“I spend a lot of time sleeping on airplanes and eating hotel food,” he said of a schedule that includes traveling to Asia a half-dozen times per year for trips that can last up to two weeks at a time.
Married with a 21-month-old son, Mr. Shroff said his free time is usually spent with his family.
“My kid wants as much attention as I have, and I wish I had more time for that,” he said.
The India growth story is not new, but the fact that four of the nine dedicated India funds were launched this year suggests a growing emphasis on the fast-growing economy.
But even Mr. Shroff admits: “This is not something you load up the portfolio with.”
“This is a product for somebody who understands the risks and appreciates the opportunities,” he added. “Investors should realize that volatility is a constant.”
The driving force behind India is the enormous consumption potential of its 1.1 billion citizens.
“The emergence of a middle class is one of the drivers behind the steady acceleration of economic growth,” he said.
With gross domestic product growth chugging along in the high-single-digit range, India is expanding in a world of otherwise slowing economies.
Mr. Shroff approaches the market with a bottom-up stock-picking strategy that places a lot of emphasis on the smaller end of the market, meaning companies with market capitalizations below $5 billion.
“We want to find companies where we feel excited about the long-term growth prospects,” he said. “Our approach is somewhat benchmark-agnostic.”
Mr. Rocco commends the focus on smaller-company stocks.
“Not all managers know their stocks or sectors as well as [Mr. Shroff] does,” he said. “There's a local bias to what they do, and you're not going to beat your peers in India unless you do something different.”
However, Mr. Rocco questions the need for a dedicated India fund in a portfolio.
“Most emerging-market funds will already have significant exposure to India, and to bet on India over China or Brazil is like adding a single stock to your portfolio,” he said.
Mr. Rocco compared the popularity of India funds with China funds in the mid-1990s. “Back then, there were only a handful,” he said. “Now there are 29.”
Mr. Shroff acknowledges that the fund is not for everyone and that foreign institutional money can have a tremendous impact on market volatility in India.
“[During] the last 12 to 18 months, the money flow into Indian investments has been positive, but if foreign investors pull back, it can lead to a hiccup,” he said. “As long as the economy continues to do well, those hiccups will not be very long-lasting, but the hiccups can be deep.”
E-mail Jeff Benjamin at [email protected].
