Schroder Asian Total Return, Lindsell Train Global Equity and Church House Tenax Absolute Return Strategies are some of the funds that investment professionals believe will sit nicely alongside the five crown-rated Jupiter India fund.
This comes following the increased popularity of Indian equities this year, which is the result of the ongoing tenure of reformist prime minister Modi, strong GDP growth and an increasingly stable political backdrop.
Year-to-date, the MSCI India index has returned 18.7 per cent compared to the MSCI Emerging Markets and MSCI AC World’s respective returns of 11.55 and 6.27 per cent.
Performance of indices in 2017
Source: FE Analytics
This hasn’t always been the case, however. Throughout the course of last year and 2015, commodity exporters such as Russia and Brazil left India trailing in the dust, as investors lost patience waiting for Modi’s economic reforms to come through. 
However, this has meant there are now some pockets of value in the country, according to a number of industry commentators, despite many investors fearing the market looks expensive. In an FE Trustnet article published last month, in fact, Ashburton’s Jonathan Schiessl told FE Trustnet the positive backdrop for Indian equities far outweighs the belief that it is a toppy area of the market.
One of the most popular options for investors looking to gain exposure to the country is FE Alpha Manager Avinash Vazirani’s £746m Jupiter India fund, which has attracted the second-largest amount of money out of all funds in the IA Specialist sector over the last three months, according to data from FE Analytics.
The manager (pictured) adopts a ‘growth at a reasonable price’ or ‘GARP’ philosophy when it comes to stock selection, which centres around finding the best-in-class companies that are set to benefit from trends changing the face of India, such as the growing middle class and the outsourcing of services from overseas to Indian firms.
It is able to invest across the cap spectrum and currently holds 56.1 per cent in large-caps, 29.6 per cent in mid-caps and 8.4 per cent in small-caps.
This clearly has stood the fund in good stead as, since its launch, it has outperformed its MSCI India benchmark by 135.02 percentage points with a total return of 208.4 per cent.
That said, the fund may not be best-suited to the more cautious investor as, over the same time frame, it has a maximum drawdown (which measures the most money lost if bought and sold at the worst possible times) of 38.86 per cent.
While this is indeed lower than its benchmark’s drawdown of 50.01 per cent, investors may want to pair this fund with another vehicle to add diversification and reduce exposure to any region-specific headwinds.
Rob Morgan, pensions and investments analyst at Charles Stanley Direct, said: “Jupiter India is a pretty high-octane investment. Not only is it focused on India, an emerging market where investor sentiment can be fickle, but it includes small- and mid-cap exposure, which adds to the risk and it has a fairly concentrated portfolio.
“I would suggest a broader emerging market or Asian fund would complement this fund in the region, and one which could perhaps be expected to protect better on the downside in the event of a sell-off.”
As such, he believes King Fuei Lee and FE Alpha Manager Robin Parbrook’s closed-ended Schroder Asian Total Return would dovetail nicely, as it aims to achieve strong risk-adjusted returns by counter-balancing equity risk with derivatives.
“This combines the skill and resource of Schroders in Asian equity selection with a hedging overlay,” he explained. “The symmetry of returns, consistently protecting capital during market stress and keeping pace during bull markets, is the fund's strongest attribute.
“The portfolio has about 12 per cent in India presently, so there isn’t too much overlap.”
Since Lee and Parbrook took to the trust’s helm in 2013, it has returned 54.91 per cent compared to its average peer and benchmark’s respective returns of 40.35 and 46.32 per cent.
Performance of fund vs sector and benchmark under Fuei Lee and Parbrook
Source: FE Analytics
It has done so with a top-decile annualised volatility and downside risk ratio, which predicts a vehicle’s susceptibility to lose money during falling markets. It also has a top-quartile maximum drawdown of 19.02 per cent (Jupiter India’s drawdown is 30.25 per cent over this time frame). It is currently trading on a 5.1 per cent discount and is 8 percent geared.
Jason Hollands, managing director of Tilney Group, says that while India is the “bright spot” of the emerging market universe at the moment, it is indeed a highly volatility market.
“In considering funds to dovetail alongside the popular Jupiter India fund, I would opt for a developed market global equity fund with a less erratic return profile such as Lindsell Train Global Equity,” he said.
“Managers Michael Lindsell and Nick Train focus on identifying businesses with durable, cash-generative models such as Unilever, Diageo, Heineken, Cadbury’s owner Mondelez and Walt Disney.
“The approach is a concentrated one, with low turnover and primarily focused on larger companies which is another differentiator from the Jupiter India fund as it has high weightings to small and mid-cap Indian companies.”
Since its launch in 2011, Lindsell Train Global Equity has comfortably doubled its average peer in the IA Global sector with a total return of 167.96 per cent. The £2.2bn fund has done so with a top-decile maximum drawdown of 5.83 per cent, as well as a top-decile downside risk ratio and annualised volatility.
Aside from the aforementioned stocks, some of its other largest holdings include London Stock Exchange, Nintendo and Paypal.
Kerry Nelson, managing director and owner of Nexus IFA, would pair Jupiter India with Church House Tenax Absolute Return Strategies, which has five FE crowns and is managed by James Mahon and FE Alpha Manager Jeremy Wharton.
“You’re going for something that is probably a little more volatile [with Jupiter India],” she said. “By the nature of the beast you know less about international markets than your own market. Also, inherently, there is still not as much transparency as there is in other markets such as the UK or Europe.
“Obviously, India is coming through the other side of that, but I would go for the antithesis of that, especially because I am going quite defensive in portfolios at the moment as I think there will be a change of wind.
“Church House Tenax Absolute Return Strategies brings that element of underlying stability that allows you to take a little bit more risk and increase volatility. I think they provide a great deal of clarity in a very cloudy market and are very transparent in the way they deliver things.”
Since the £83m fund’s launch in 2007, the fund – which is benchmarked against cash – has returned 52.5 per cent and has done so with a maximum drawdown of 8.8 per cent.
Performance of fund vs benchmark since launch
Source: FE Analytics
In terms of asset class allocation, the fund currently holds 34.8 per cent in floating rate notes, 22.7 per cent in cash & treasury bills, 20 per cent in fixed interest and 11.7 per cent in international equities.
It aims to achieve positive returns over rolling 12-month periods with as little volatility as possible. As a point of comparison, its annualised volatility since launch is 3.73 per cent while the MSCI AC World index’s annualised volatility over the same time frame is 14.68 per cent.
Adrian Lowcock, investment director at Architas, would opt for JPM Emerging markets Income fund, which is headed up by Austin Forey and Leon Eidelman.
"[They] will invest in both defensive and cyclical stocks. This ability to tilt the portfolio helps the manager deliver strong performance whilst maintaining a high yied," he explained.
"In addition his focus on income stocks should act complimentary to the Jupiter India’s growth focus as well as balancing the bias towards small and mid-caps. Whilst India does look attractive long term, it is important to be well diversified across emerging markets and the income element helps focus on companies with good management and shareholder focus."