Global Launches The Mayur Hedge Fund
• Shailesh Dash: The Asian, and in particular the Indian markets offers a compelling investment opportunity.
Global is pleased to announce the launch of The Mayur Hedge Fund, a long short absolute return growth oriented fund with a net long bias. This is the first direct India-focused product by Global Investment House which will aim to achieve capital growth and provide investors the opportunity to benefit from the long term growth of the Indian market.
The Asian, and in particular the Indian markets offers a compelling investment opportunity stated Shailesh Dash, Head of Alternative Investments at Global. Shailesh strongly believes that the investment case for India is powerful; the country – which is home to a quarter of the world’s population under the age of 25 has a positive demographic profile, an emerging middle class, good corporate governance and an economy that has a low reliance on foreign trade. Shailesh added that The Mayur Hedge Fund is well positioned to effectively tap into these trends to the benefit of its investors.
India which is part of the BRIC (Brazil, Russia, India, and China) conglomerate is already the fourth largest economy in the world in terms of purchasing power parity and is projected to be approximately 60% of the size of the US economy by 2025. Shailesh stated that the growth dynamic in India is based on domestic consumption, services, high levels of investment and infrastructure spending.
He added that India is now experiencing the positive impact of a ‘baby boomer’ generation comprised of people born in the 1980s supporting a much smaller proportion of older workers. This favorable demographic profile called the ‘demographic dividend’ is having a positive impact upon the Indian economy. In fact, India has one of the highest proportions of economically active citizens in the world and a population size of 1.13billion people, 60% of whom are below 30 years of age.
Joseph Joseph, Head of Hedge Funds at Global stated that this highly educated and skilled middle class is growing, earning more, spending more, saving more and setting the stage for a long term consumer-driven boom. Furthermore, there is a huge amount of wealth being created by entrepreneurs, many of whom control some of India’s biggest companies. The Indian economy has been through a fundamental shift over the past 30 years, moving from an agriculturally-based economy to one in which services account for more than 50% of the GDP.
This particular characteristic sets it apart from other emerging economies. Joseph added that ''India is an open economy and there is substantial potential for growth bolstered by foreign exchange inflows. However the economy is not dependent on foreign money as it is underpinned by domestic institutional money such as domestic life insurance companies which are amongst the biggest investors at present”. India plans to spend an estimated US$475bn between now and 2012 on roads, railways, ports, electricity transmission lines and other infrastructure. The development of a world class infrastructure is central to India’s emergence as a global economic powerhouse''.
The Indian stock market offers one of the world’s most diversified basket of stocks and sectors. There are nearly 6,000 companies listed on the Indian stock exchange of which over 180 have a market capitalization over US$1billion compared to less than 40 in 2005. The stock market is also broad based and is one of the most liquid in the world, with turnover of USD204 billion a day.
Equity is the most appropriate asset class to capture the potential of the fast growing Indian economy. Though until recently, valuations were historically high, but Indian companies continues to exhibit the most efficient use of capital compared to companies in the other emerging economies.
Meanwhile, Joseph added that the fund employs a bottom-up and fundamental approach. He stated that the fund will seek to invest in equities of well managed, high quality companies that have the potential to grow at a robust rate. The fund will invest in small to medium capitalization equities, but has the latitude to invest in large capitalization stocks also. As far as risk management is concerned, the fund will have a short position (net long exposure of a minimum of 25% to a maximum of 75%) as a means of protecting against overvaluations.
Joseph further added that the fund aims to build and maintain a diversified portfolio of well researched exposures, and is capable of offering strong downside protection as well as upside gains by shorting equities and index strategies. India has a robust derivatives market with over USD7.7 billion turnover per day which provides liquidity to make this strategy feasible.
The fund will be advised by the team in Global Investment House India Private Limited (a wholly owned subsidiary of Global) based in Mumbai and headed by Dileep Madgavkar, formerly Chief Investment Officer of ICICI Prudential Asset Management Co. Ltd., one of India’s largest private mutual funds. Shailesh stated that Dileep with over 20 years work experience in bull & bear markets in India will be further supported by a team in Mumbai. He added that during Dileep’s tenure in ICICI Prudential, he managed to grow the assets under management from a mere USD 40million to over USD4,000 million (100X) from 1998 to 2003, an impressive track record with returns far above the BSE Sensex. From ICICI Prudential, Dileep moved to Prudential Asset Management in Hong Kong as Investment Director for a more regional role where he launched the first dedicated India China fund out of Japan. Joseph added that with Global’s expertise in asset management supported by Dileep and his team in India, the Mayur Hedge Fund will be in the hands of one the most seasoned professionals in the field of investing in the subcontinent.
Global received its FII License and issued it's first India economic report in 2006 and has committed approximately USD 100 million in the Indian markets. Global’s research team has issued research on over 30 companies covering 3 sectors within 18 months. Additionally Global was one of the top 10 shareholders in Reliance Petroleum Limited (the sixth largest grass-root refinery in the world) and has a continuing private equity and proprietary book of investments in India.
The Mayur Hedge Fund will also benefit from Global's dynamically evolving Hedge Funds team which has invested across over 80 different hedge fund managers. The team will be part of the investment committee which oversees the implementation of a thorough investment approach and adheres to strict risk management guidelines to generate superior absolute returns. Furthermore, there will be no exit fee charged on the Fund and will target a return of 15-20%. This despite the fact that uncertain global markets are undergoing a correction and the Indian markets are likely to be range bound in the near term.
We at Global believe that The Mayur Hedge Fund offers investors an excellent investment opportunity as it provides GCC investors a hedge against any downward trend in Oil prices and a chance to benefit from the very strong internal and external growth narrative that is set to drive the Indian economy for the foreseeable future.
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