Funds managed
| Fund name | Asset Class | License |
| Ashmore alternative investment trust fund | – | SEBI AIF Cat 3 |
About the AMC
- The firm domiciled in Mumbai, established in 2016
- Trust Name – Ashmore Alternative Investment Trust
- Fund Manager – Ashwini Agarwal, he is working in Ashmore since 2006
- About Fund Manager- Designated Partner and Portfolio Manager, responsible for the firm’s investments in the Indian subcontinent, MBA from IIM Bangalore
Investment Philosophy (for firm)
The Alternatives theme seeks to provide investors with attractive returns across various investment strategies. These include private equity, infrastructure, special situations, distressed debt and real estate. They are long-term strategies which seek to leverage the increasing maturity of Emerging Markets economies by identifying and investing in the drivers of these economies. These include an expanding consumer market and middle class with growing energy, healthcare and infrastructure needs. These are also driving increased trade both within and between Emerging Markets countries. Ashmore’s products within the Alternatives investment theme provide investors with a diversified portfolio of investment opportunities on a regional, country or industry basis. Major Investments are into:
- Private equity healthcare
- Private equity infrastructure
- Infrastructure debt
- Real estate
Media
Put The Money Back In Markets In Slices: Ashmore Investment’s Ashwini Agarwal, BloombergQuint, April 13, 2020,
https://www.bloombergquint.com/markets/put-the-money-back-in-markets-in-slices-ashmore-investments-ashwini-agarwal
SUMMARY
As the equity indices roiled amid the coronavirus pandemic, Ashmore Investment Management India LLP’s Ashwini Agarwal suggested putting money back in the market in “slices”. “People should look at asset allocation and think hard about what the equity exposure should be,” the founder and partner at the investment manager told BloombergQuint in an interview. “Sell off the underweight equity to where it should be. Reflect on the equity exposure and if you are below what it should be then put the money back in the market in slices.” This comes as the Covid-19 pandemic stalled economic activities and India went into the world’s biggest lockdown. The International Monetary Fund has already declared a recession. India’s equity market tracked the worst global selloff in more than a decade before recovering some losses as large economies started announcing stimulus. Corporate earnings are also likely to take a hit in the quarter ended March as the outbreak disrupts businesses in an already slowing economy.
Key highlights from the conversation:
Day to day movements are extremely hard to predict as there are several moving parts: Covid-19 data, huge amount of fiscal stimulus is causing expectations to change on a daily basis, and Indian markets are taking cues from overseas.
While shutdown is necessary from health and public order perspective, it will create a significant pain for the economy. Whether this market rally gets sold into or not can’t say. Economic situation is fairly serious at this point.
Typically, in the sell-offs, long-term investments reap great rewards, but better to hold on to some cash if one wishes to time the trades in short term.
Sitting on cash or investing, both make sense but it is stock specific. You have to do it gradually and pick your bets very carefully as we are stepping through the mind fleet.
We have been reasonably positive on pharma sector. It has more legs to go. I worry that it’s become more or less a consensus trade and this works in short period of time. Don’t know how this will play out over the long and
and medium term.
Lot of financials is down 70 percent from the peak will see ferocious rallies when risk appetite will return. There is value in many of these beaten down names and these will do well when the risk returns
While we can make some estimates looking at the past data, balance sheet, liability and asset side, one has to be aware that things could turn uglier or better compared to base assumptions.
Small caps have fallen significantly than the previous peak. There is a lot of value out there, not all balance sheets and businesses are broken. There is a lot of excitement for these specialty chemicals and niche pharma stocks. There is a great opportunity here.
Indian Investment Market, Deloitte, January 28, 2019
SUMMARY
Pooled funds may find it easier to invest in AIFs after acquiring a Foreign Portfolio Investor License in India. Strong valuation support in several smaller stocks with price earning or price book ratios down to multi year lows.
Value buys, ET now, Aug 09, 2019
SUMMARY
Will the bad get worse before it gets better or are we in a buying zone? Would you stick your neck out and say I am a buyer in this market?
There is extreme negativity in the marketplace. If you look at some of the price action that is happening on the back of earnings misses of a small magnitude, it clearly tells us that there is a very high level of nervousness and a very high degree of negative sentiment. If history is anything to go by, these are the kind of markets where you should be buying.
So yes, I feel that we are in a territory where if you were to take a one- to-two year outlook, you would make a lot of money. There are stocks which are trading at very compelling valuations. Faith does not exist anymore and this is really the time one should be investing. If things are going to get a lot worse before they get better, that is a very difficult question to answer. But I would definitely say that the pessimism is extreme.
If you look at the newspaper headlines, the government seems to be recognizing that it needs to do something. I do not know what they will do, what they will come up with in terms of a policy response, but my sense is that things are at an extreme in terms of negative sentiment.
A bigger concern is what exactly to buy. Would you buy the beaten down consumption theme? Would you stick with the leaders, the safe bets?
It is going to be a little bit of both in the sense that private banks, some of the pharma stocks are looking attractive from a medium-term perspective and one would buy them. Some of the pharma stocks are trading at multi-year lows. The front-liners look quite interesting.
But the front-liner consumer names look fairly expensive to me. I would prefer those consumer discretionary names that have corrected significantly but it has to be a little bit of both. Some of the front lines have to be picked for the sake of liquidity and safety as well as the fact that earnings prospects are improving at the margin for them. On the other hand, I would seek value where there are extreme price corrections but the business models are robust and the balance sheets are fine. There might be a temporary hiccup to earnings as the consumer environment is quite soggy at this point in time.
If you see some of these stocks selling off, these are great opportunities to buy them. One of our biggest themes of investment is buying good businesses when they are going through a rough time and that always pays off irrespective of where you might be in a cycle.
In January and the theme of all the reports which came from CLSA, BofA ML, Morgan Stanley was that 2019 will be a great recovery year for India, the world will slow down and India will blossom. Look at what are we staring at. The basic assumptions for growth, earnings and PE multiples have got challenged. Where will the reset end?
I would like to break up the problem into two parts. One is of the sentiment and fear and the other is the fact that the economy is slowing down. If you come to the sentiment and fear, it is obviously led by the fact that we have not seen any resolution to some of the extreme indebtedness in financial services companies. You know the names I am talking about. We had expected some of these resolutions to happen much earlier, but it has not happened.
You saw the unfortunate event at CCD and that again has come as a rude reminder that a lot of the corporate debt problems are not fully understood or not fully out there and that is hurting sentiment in a big way.
Some of these financial services companies and banks are working very hard to resolve the problem and the problem is resolvable.
You apply some haircuts which are already reflected in the NAVs of the mutual funds that hold that paper or the banks that have lent to these financial services companies and if you actually apply that haircut and try and resolve the debt, there is a solution that is possible and I believe it should come through in the near future.
A lot of the negative sentiment or fear can get reduced or addressed if some of these resolutions take place. If we separate the fear from the reality and say that the fear should normalize over the next two-three months, I do not know how long it takes but the slowing earnings is probably a reality that we have to contend with. Yes, of course. You have to live with the fact that earnings are going to be lower than what we had all imagined in January. But at the same time there is excessive pessimism and excessive fear today which will probably go away.
The market should be a little bit better by the end of the year compared to where they are today. You mentioned that when you saw your earnings estimates in January and you look at the situation today, things are very different. So, obviously in automobiles and discretionary spend, we have seen a significant slowdown. Some of it is coming from rural India, some of it is also led by the fact that the NBFCs are unwilling or unable to lend.
Now the unwillingness or inability to lend should get addressed if the liquidity remains easy, which the RBI seems to have promised and has delivered on. Once a couple of these resolutions start to take place, it will bring confidence back among the banks that had lent to these NBFCs. NBFCs themselves have to have access to financing that says it is business as usual. We need to be careful but let us start lending once again. The lending activity has come to a complete standstill is how I understand it. It is driven by the fear, driven by the uncertainty that everyone is facing and if the fear normalizes, you will start to see an improvement.
But, you are right, we cannot get away from the fact that the economy is growing slower than what we had expected at the start of the year. You will still see earnings growth in the financials from lower NPL provisions. We are hoping that the Essar Steel resolution will take place over the next month or two now that the matter is w with the Supreme Court, let us see what comes out of there. So the NPL driven or the credit cost driven earnings growth will still get delivered but on the consumer discretionary side, we will probably have much softer numbers compared to where we were at the start of the year.
Are we in for pain, trade war, asset meltdown for the next two, three, five years? Rather than investing, should one be in capital protection mode? I am asking you a question based on cycles, patterns and the environment?
Let us go back to basic economics, as to what is a recession and what causes a recession. An economic recession occurs when there is a fear about the future, fear about uncertainty and everybody tries to hold on to what they have, put it in the banks, put it in the banks, put it in gold or put it under your mattress because we do not know what tomorrow will bring.
Obviously, in the equity capital market that has been the prevalent sentiment in the last several weeks now. If there is no policy response along the lines that I had outlined earlier in my conversation and there is no resolution for some of the extreme stress with a few lenders, NBFCs and banks.
If there is no new capital provided to the PSUs which can enable them to lend again, if there is no thinking on the part of the government about what needs to be done to provide a policy response to the economic slowdown that we are witnessing, can we get into a recession? Yes, it is possible and those fears are not entirely unfounded, but at the same time, we have a lot of ifs and everything has to go wrong for that terrible outcome to come through.
One of the issues that India is facing is that the external environment, which is the world outside India, is not in a great shape and we cannot expect any tailwinds from the global economic system. Whatever has to be done has to be done internally but at the same time internally things are not bad. We might have a fiscal which is slightly on the higher side if you consolidate the off balance sheet amounts and but inflation is under control.
We have plenty of reserves, the oil price is subdued and the outlook there is reasonably benign. There are plenty of policy options wit there are plenty of policy options with the government. It can do a lot of things to address the situation. It can recapitalize the banks, it can attract more foreign capital, it can put out a couple of PSUs large ones for strategic sale which will give it both the money and provide hope to the holders of PSU stocks that real value in these names can be realized. Depending on what we want to assume, if you think that nobody will do anything, then you know the outline is correct but if we assume that the government is now cognizant that something has not quite worked the way it wanted to and some tweaks are required and some stuff needs to be done and if some of these things start to come through, then the fear factor will go away.
The slowing growth will take some time to recover I agree with that but the fear factor which is prevalent today would go away if some of these things come through.
A niggling fear is this FPI pullout to the tune of about $2 billion ever since the surcharge was slapped in the budget, even though the Finance Minister herself is meeting the FPI fraternity today and perhaps a rollback is in the works. We also understand that comfort package may also include some tampering to LTCG. But who knows how badly the sentiment has been damaged?
A stability of taxes and business friendly tax regime is essential for both compliance and to encourage investments. Unfortunately, the current administration or the has used every trick in the book to impose more taxes rather than rationalize the taxes.
Think about what it wants investors to do in India and how it wants investors to respond. In January 2018, we imposed the long term capital gains (LTCG) tax and we saw the consequences of that. This year, we imposed surcharges on all income above a certain threshold which unfortunately has brought into the net, several foreign portfolio investors as well as domestic alternative investment funds. This is a situation where all investors want certain stability in the tax regime. When you go into a country or you get into an investment, you want certain assurance that what we are assuming as a taxable income or what we are assuming is the tax rate applicable to the income you hope to generate will remain stable. If that goal post keeps moving it becomes very difficult and it becomes very disheartening.
Look at corporate income. You pay the corporate income tax rate, then you pay dividend distribution income, and then in the hands of the investors you again pay a dividend tax in excess of Rs 10 lakh of dividend income plus the surcharge on that. Effectively, you are talking about 58%-60% tax effectively on pre-tax corporate income. How is that reasonable and to my mind a problem of compliance arises from the fact that you have multiple levels of taxation on the same income. That defeats the very purpose of hoping for higher compliance. Obviously, while the tax hit is not large, it has soured the mood to some degree and I am hoping that the government will do the right thing. I am optimistic. Let us see what comes out of this.
Do you think a roll back can change sentiment or do you think the FPI fraternity has completely bid adieu to Indian equities?
No, no. We are overreacting about it. Foreign investors own more than $400 billion of assets in India. They have sold $2 billion w worth of assets which is a very small number. Most investors who invested, continue to like the long-term growth prospects that the country offers and will remain engaged with India. Obviously, as the taxes go up, your expected returns come down. Your allocations reflect that your expected returns are on a post tax basis. So that is a natural reaction but to say that FIIs are voting with their feet and all of them will go away is just not real. That again reflects the kind of fear that all of us are suffering from now.
Have you added new sectors? Have you bought stocks which you earlier wanted to buy because they are available or are you just buying the same old stocks and just adding a bit more?
We are doing a few things. Unfortunately I am not at a liberty to speak about what we are doing. Earlier in my conversation, I highlighted that it is a little bit of all three in the sense that we are adding to some of the front line names that we continue to like where we think the opportunity to make money is there in the long term. At the same time we are adding to names that are beaten down where we believe that there is excessive pessimism, valuations are extremely attractive, balance sheets are fine, cash flows are okay, there is a temporary blip in earnings or there is a temporary issue that the street is worried about. If we feel comfortable enough to go in there we are going in there. So it is a little bit of all of these things.
While we are excessively focusing on FII selling and it is a less than $3 billion, when I looked at the aggregate number for July and August put together, the SIP number or the DII figure in that same period is about $2 billion. So, there’s a net gap at institutional level of a billion dollar and yet markets have collapsed. Why is that?
That is right. Markets have collapsed because of two reasons: one is that the economy is growing a lot slower than what one was looking at even three months ago. If you look at the auto sales data, that is self-explanatory. That is getting reflected in the marketplace and post budget, there was a huge despondency with the investor community because of higher tax rates applied to income above a certain threshold because of the surcharges applied and because of the realization that moderate taxes in the long run moderate and stable taxes which is the bedrock of any well-functioning marketplace is something that is not assured in this country. So the mood had soured significantly.
On top of that, we have not had a resolution to any of the stressed NBFCs/banks that we have been expecting for some time. There have been delays. One realizes that the intent to resolve is very much there but there are regulatory wrinkles that need to be sorted out and that have taken time. So, that has not helped and last but not the least, while the liquidity in the interbank system has come through, it is still not flowing to the NBFCs which is a large part of the lending market.
All these things have come together and that has soured the mood considerably. FII outflows are an issue and it is reasonable for all investors domestic or overseas to expect moderate and a stable tax regime. I hope the government will deliver on that. The FII selling is modest to say the least and I do not believe that people are looking to exit end masse from India. I do not think that is the narrative at all.
Ashwini Agarwal on the Future of the Micros and Macros in the Market, CNBC TV18, Jun 30, 2018
https://www.youtube.com/watch?v=MtbMnpoKWrs
SUMMARY
Market View with Ashwini Agarwal of Ashmore Investment, ET Now, Apr 17, 2018
SUMMARY
As per Ashwini, there are high hopes to look out for earnings revival for industrial sector in higher growth. The growth is higher in case of energy and metal industry. As the top line growth should pay out in March quarter ending it also depends on how NCLT resolution processes for list 1 & list 2 progress. The year 2018 inspite of 10% fall in 1st quarter happened; we already recovered the decline in mid of Jan & March. Due to political uncertainty as well as global events ahead so it’s harder to predict the way. It’s difficult to say that worse is behind us.
He sense that economy may bounce in narrow range through rest of year, with earnings growth ,valuation still not attractive to say bottom is behind us, we are not dealing at one standard below, we have long term average price on nifty benchmark. There is no accuracy about impact of political issues on economy. There can be more downside as the year ahead.
There is trigger for banks as the economy booms though the small scale SMEs are stressed today, they should also start getting resolved. Year 2013 -2018 was tough period for industry which reflected in banking system. So as the economy improves the bank assets will improve. We can’t play takeover story by individual players stocks either by public sector banks or money lenders. Actual time to invest is when new time is terrible, seek comfort in value only mantra for professional value. If there is adequate value in stocks purchased then risk of capital loss, becomes relatively lower.
Know Your 4C Fund Manager- Ashish Shanker in conversation with Ashwini Agarwal, Motilal Oswal, Jul 5, 2018
Will COVID-19 Trigger The Domino Effect?, ET NOW, Apr 3, 2020
SUMMARY
During Covid -19, Asset allocation is the key.
It should be appropriate to age, income, savings profile, etc then sticking to the long term is the right answers. For now one can opt for companies with no or little leverage, companies which are dependent on Indian economy so that we can see and feel what’s happening in the market and also companies which are catering demand for essential and medical services, life insurances
Analyst questions
What will you suggest to retail investors for minimizing risk and avoid volatility of market?
According to you, what kind of asset allocation should be made sector wise?
Reviewed by- Shivani Kadam (7th May 2020)
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