Page 38 - DIY Investor Magazine | Issue 33

HEADS WE WIN, TAILS WE LOSE: ASHOKA INDIA EQUITY
Ashoka India Equity’s unique structure means it is strongly aligned with shareholder interests...
“Beware of the person who gives advice, telling you that a certain action on your part is ‘good for you’ while it is also good for him, while the harm to you doesn’t directly affect him,” writes Nassim Taleb in his book Skin in the Game.
Few lines could better capture one of the perennial problems found in the world of investing. Someone managing a fund wants you to invest in it.
You both benefit if it goes up. But if the opposite happens, the fund manager is still going to get paid, even though you’ve lost money.
It’s a problem with no good solution. Even fund managers need to get paid at the end of the month. They are also providing a service. Managing an investment portfolio isn’t a quick or easy process, so it makes sense that we pay them to do so – just as we pay almost anyone else that provides us with a service or product.
And yet that doesn’t mean there shouldn’t be a balance between the needs and interests of investors and the people managing their money.
Some investment trusts try to do this by scrapping performance fees or making it tougher to hit the targets needed to receive them. Alternatively a trust’s board might simply work out an agreement to cut management fees.
CHANGING THE DYNAMIC
These are all positives but they’re arguably just a way of reducing the negative impact that the dynamic described above has, rather than changing it.
All is not lost, however, as there are fund managers out there taking a different approach to try and balance their interests with their investors’.
‘A STRONG TEAM OF EQUITY ANALYSTS WITH BOOTS ON THE GROUND IN INDIA, WHO CARRY OUT MORE THAN 3,000 MEETINGS PER YEAR’
One of them is White Oak Capital, which manages Ashoka India Equity (AIE). Launched in 2017, the asset management group was founded by Prashant Khemka, CIO and lead PM of both Goldman Sachs India since March 2007 and Global Emerging Markets Equity since June 2013.
AIE was set up by Khemka’s team in July 2018. From its launch until the end of February 2022, the trust has been the best performing closed-ended fund in its peer group.
It has been remarkably consistent in doing so too. Not only are its total returns superior over the period since its IPO, but it was the best-performer on an annual basis every year since launch.
In fact, from the start of 2022 to the end of February is one of the only periods where the trust has underperformed. Even then, in that period, both its benchmark index, the MSCI India IMI, and its peers in the space have all delivered negative returns.
NO MANAGEMENT FEE
There are likely numerous reasons for the trust’s success. It has a strong team of equity analysts with boots on the ground in India, who carry out more than 3,000 meetings per year.
White Oak focuses on a cash flow centric valuation approach to analyse prospective investments.
‘IT IS A UNIQUE ATTEMPT TO FIND A MIDDLE GROUND WHICH WORKS FOR BOTH INVESTORS AND FUND MANAGERS’
AIE is also structured in such a way that arguably optimises the fine balance between shareholder interests and the fund manager’s need to make money.
DIY Investor Magazine · Apr 2022 38