The Keys to Investing in India, According to Aubrey’s Founding Partner, Andrew Dalrymple
As part of the LarrainVial Asset Management seminar taking place on November 14, titled Emerging Markets: The Power of Consumption, Andrew Dalrymple, the investment manager and co-founder of Aubrey, gave an exclusive interview to Diario Financiero. In this interview, he shared his outlook on investments and markets.
Read the interview here:
“Our focus is on consumption, and we are interested in companies that offer goods, services, properties, cars, and convenience to ordinary people,” said the firm’s co-founder.
Within the diverse world of emerging markets, much of the Scottish fund manager Aubrey’s investment strategy, and its equity vehicle *Global Emerging Markets* (GEM), is concentrated in India.
“The market that really excites us most and is the one where we’ve had most of the fund exposed, is India. We have reached up to 55% exposure in the fund, which is a huge overweight in emerging market terms,” revealed the firm’s investment manager and co-founder, Andrew Dalrymple, to Diario Financiero.
For Dalrymple, who is also the portfolio manager of GEM, the key to the appeal of this market lies in its solid economic growth history and its impact on the population’s consumption capacity, in an environment dominated by local players.
What is Aubrey investing in within India?
“Our fund is mainly focused on consumption, so we’re interested in companies that provide goods, services, properties, cars, and convenience to ordinary people. People in India are getting richer very quickly.”
Why?
“The economy is growing at around 7.5%, inflation is reasonably controlled, employment is growing strongly, and wages are rising in line with inflation, around 5% to 6% per year. It’s a very powerful investment story, and it’s going to generate a lot of money for us in the medium and long term. In fact, it already has generated quite a bit of money.”
What companies are in the fund?
“We have the largest mobile phone provider in India, Bharti Airtel, which holds a 42% market share and is growing its subscriber base by about 10% per year. And most importantly, the average price of its monthly subscriptions is rising very steadily.”
Some market players believe that valuations in India are very high…
“If you’re looking at everything for the next quarter or two, then yes, you’re probably right, valuations are too high. We try to focus a bit further out, we forecast at least two years ahead. These are expensive stocks, but people simply don’t appreciate the long-term opportunity.”
But are the valuations justified?
“Normally, the market is expensive for a very good reason, and usually it’s because their profits are growing extremely quickly. Also, India is a relatively closed economy; it’s hard for foreign companies to enter, and it’s a very complicated market.”
How does that translate into performance?
“Valuations scare a lot of people off. Many fund managers are underexposed, and the Indian market has risen nearly 40% this year, so they’ve missed a huge opportunity to make their investors a lot of money.”
Cautious Approach to China
Despite this, Dalrymple revealed that in the past three weeks they have reduced their exposure to India. The reason?
“Cautiously, over the last month, we’ve invested a bit more money into China,” he highlighted.
Are the measures announced by the government enough for China to regain its appeal?
“So far, they’ve been quite small. But the important thing is that they represent a change in policy, because over the past four or five years, the Chinese government had shown no interest in the private sector. So, this was the first time they’ve shown any sign of doing something economically helpful to businesses and the stock market. It’s exciting.”
Where are you investing?
“We’re not trying to do anything too complicated, as our exposure to China is extremely limited. When markets hit bottom and start to rise again, the first ones that are going to rise are the big stocks.”
Which ones?
“We have around seven holdings in China at the moment, which make up about 23% of the fund, and they are all companies that probably everyone has heard of. For example, Alibaba, Tencent (the parent company of WeChat), BYD, CTrip (leading online travel agency in China), and Medea (appliances).”
Why did you decide to partner with LarrainVial?
“It’s mutually beneficial. We found that the research effort LarrainVial can provide on Latin American stocks is very helpful, because it’s never been our strong suit.”
Andrew Dalrymple co-founded Aubrey in 2006 and launched the Global Emerging Markets Strategy in 2012, which had accumulated $613.5 million in assets under management by the third quarter of this year.
The Scottish fund manager caught the attention of the Chilean market after LarrainVial acquired 25% of Aubrey’s ownership in the first quarter of this year.
Meanwhile, on November 14, Dalrymple will visit Chile for a seminar hosted by LarrainVial focused on emerging markets.
This article was originally featured on LarrainVial’s website, showcasing our co-founder Andrew Dalrymple’s insights on India’s growth potential and emerging markets. Read the original version here.
