IFN - IFN Vs. WAINX: Comparing Actively-Managed India Funds
2023-07-07 07:00:00 ET
Summary
- The article compares two actively-managed funds focused on the Indian market: The India Fund and Wasatch Emerging India Fund.
- Both funds employ quantitative and fundamental analysis with a bottom-up stock picking and asset allocation approach.
- India's growing middle class, high forecasted GDP growth, and potential benefits from the de-China supply chain make it an attractive market for investment.
- After my look at various funds that only invest in the country in India, I like the active managed approach and the results Wasatch has achieved.
(This article was co-produced with Hoya Capital Real Estate )
Introduction
I often get suggestions from readers that there is fund they would like covered. Such was the case in the comments to my EMF Vs. WAINX: Why I Sold The First; Bought The Second Fund article. They suggested comparing a popular India investing CEF against the MF, so that happens here. This article will compare two actively-managed funds, one CEF, one MF.
The India Fund review
Seeking Alpha describes this CEF as:
The India Fund, Inc. is a close ended equity mutual fund launched and managed by Aberdeen Standard Investments Limited. The fund invests in public equity markets of India. It seeks to invest in stocks of small-cap, mid-cap, and large-cap companies. The fund employs a quantitative and fundamental analysis with a bottom-up stock picking and asset allocation approach to create its portfolio. IFN started in 1993.
Source: seekingalpha.com IFN
IFN has $497m in AUM and has a fee level of 133bps. The TTM Yield is listed as 17%. Despite being a CEF, very little leverage is currently used.
IFN holdings review
As with many EM funds, Financial stocks are the largest sector. I will compare these to WAINX later with more comments at that time. The sector data is from 5/31/23; the full holdings list shown next was last available from 3/31/23. While in a different order, the Top 10 stocks were the same on both dates.
With under 40 stocks, it is not a surprise that the Top 10 account for over 56% of the total weight, 3% more than at the end of May. The smallest 10 positions account for 8% of the portfolio.
IFN distributions review
IFN pays holders each quarter, with recent years having an extra payout in December. As the next chart shows, most of the recent payouts have come from LTCGs.
The last use of ROC was in Q3 of 2021.
Premium/discount review
As the chart shows, the current .72% discount is one of the smallest in years except for earlier in 2023. There were times years ago that IFN sold at large premiums.
Wasatch Emerging India Fund review
Seeking Alpha describes this MF as:
Wasatch Emerging India Fund is an open-end equity mutual fund launched and managed by Wasatch Advisors Inc. The fund invests in public equity markets of India. It invests in stocks of companies operating across diversified sectors. It invests in growth stocks of companies across diversified market capitalization. The fund employs fundamental and quantitative analysis with bottom-up stock picking approach to create its portfolio. WAINX started in 2011.
Source: seekingalpha.com WAINX
WAINX has $505m in AUM and has a fee level of 151bps. The yield varies too much to be meaningful.
WAINX holdings review
Holdings were last report for 3/31/23, with 27 positions at that time.
Holding fewer stocks, the Top 10 comprise 65% of the portfolio, the smallest 10 just over 10% of the weight.
WAINX distributions review
WAINX uses an annual payout schedule and since 2015, all of those have come from either ST or LT capital gains; none from income. There was no payout at the end of 2021.
Comparing funds
The Morningstar Style boxes show WAINX taking a more growth investing approach, with more exposure below Large-Cap stocks.
morningstart.com; multiple pages
The factors support the allocation data of growth versus value stocks. I shaded in green the "better" value as I see it.
To have compatible data, I used Morningstar also for the sector analysis.
morningstar.com; compiled by Author
Almost half the sectors show a 5+% difference so how investors view future sector performance is important in choosing between these funds. Now for what really counts as all the above are snapshots in time.
With a similar StdDev but lower Beta, WAINX has outperformed IFN in the long run. While IFN has the better results over the past three years, the last three months once again favor WAINX.
Portfolio strategy
Investors rightly should ask why own a fund that ignores the rest of the Emerging Market countries. Here are some facts about India that makes them an attractive market to invest in.
- In the near future, India will pass China as the world’s most populous country.
- 12% of total population of India speaks English. This makes India the second largest English-speaking country in the world. Most educated people in India speak English.
- Growing Middle Class and high forecasted GDP growth means most Indian companies have an expanding home market to exploit.
- If the de-Chinatizing supply chains truly happens, while not the lowest cost manufacturing choice, India’s other advantages should outweigh that disadvantage.
Final thoughts
I have covered and compared each of these funds against other funds, which also provide informative comparisons.
- EMF Vs. WAINX: Why I Sold The First; Bought The Second Fund
- IFN Vs. INDY: Similar Strategy For India Stocks; Results Depend On Reinvestment
Reading those is a good start in the due diligence a good investor will do before picking the fund that best matches their strategy and current portfolio allocations. Here is a short list of other India-focused funds. This source only includes CEFs and ETFs, no MFs.
As indicated by the fund I own, I favor the WAINX MF.
For further details see:
IFN Vs. WAINX: Comparing Actively-Managed India Funds