Former star Goldman Sachs emerging market fund manager Prashant Khemka hopes to raise up to £200 million for a no-charge India equity investment trust.
The Ashoka India Equity Investment Trust will not levy an annual management fee. Instead, the investment team, headed by Khemka (pictured), will follow Woodford Patient Capital Trust (WPCT) and Aurora (ARR) in charging a performance fee paid in shares if they grow its net asset value (NAV) faster than the MSCI India IMI index in sterling terms over the medium-term. Board director fees will also be paid in shares.
As Goldman Sachs Asset Management’s head of emerging market equities, Khemka managed the Goldman Sachs India Equity and Global Emerging Markets funds. Between May 2014 and April 2017, he was consistently AAA or AA-rated by Citywire for his superior risk-adjusted returns.
He left Goldman Sachs Asset Management in April last year to found White Oak Capital Management, which oversees around $463 million in assets. Khemka also founded Acorn Asset Management, which is the appointed investment manager on the fund and has been incorporated in Mauritius. The business manages the India Acorn fund, which has $160 million in assets.
If successful, Ashoka India Equity will list on the premium segment of the main market of the London Stock Exchange via a share placing of up to £100 million in early to mid-July. If demand exceeds 100 million ordinary shares, the board can issue another 100 million shares.
Under the trust’s share issuance programme, the board can issue a further 200 million ordinary shares and/or C-shares over the 12 months following the publication of the prospectus.
Khemka and his eight-strong investment advisory team will aim to beat their benchmark by 30% over consecutive, three-year periods by investing between 20 and 40 large and small companies from across the Indian stock market. They will target undervalued companies with attractive prospects and will not focus too heavily on macro-economic factors.
The team also has the freedom to invest up to 10% of gross assets in unlisted companies and employ gearing - or borrowing - up to 20% of net asset value.
The big investment opportunity
The launch comes at an mixed time for the India's stock market and economy. After rallying strongly last year in response to prime minister Navendra Modi's reforms, the stock market has had a tougher year, spooked by a new capital gains tax, higher oil prices and the political uncertainty as elections loom next year.
Discounts on the shares of the three existing India trusts (Aberdeen New India ANII, India Capital Growth IGC and JPMorgan Indian JIII) have widened to between 13% and 15%, which could indicate a difficult environment in which to raise new money.
In Khemka’s opinion, India currently offers investors a ‘multi-generational opportunity’ because of the country’s strong growth potential, attractive demographics and rising domestic consumption. What’s more, he says many listed companies are under-researched because the market only attracts moderate coverage from stockbrokers and banks.
With this in mind, the trust is likely to target stocks capitalising on increased domestic consumption, changes in consumer behaviour and the growth of the private sector in various industries.
The team will be based in Mumbai and includes senior investment analyst Kamlesh Ratadia, who formerly worked at Goldman Sachs Asset Management with Khemka, covering Latin America and India. Manoj Garg is another senior analyst, who previously covered equity research in healthcare and pharmaceuticals at Merrill Lynch.
The trust's board includes Dr Jerome Booth, an economist specialising in emerging markets, who formerly established Ashmore Group. It will be chaired by Andrew Watkins, an investment trust specialist who previously worked at Jupiter Asset Management and Invesco Perpetual and is a non-executive director at F&C UK High Income (FHI).