SMSF trustees and advisers need to recognise the opportunity for growth in India as portfolio exposure to the world’s fastest-growing major economy has been relatively slow.
“SMSF advisers and investors face a big challenge in finding genuine growth assets in a low-interest-rate, low-growth environment and India provides an important growth focus to an SMSF portfolio,” India Avenue Investment Management managing director Mugunthan Siva told selfmanagedsuper.
“SMSF investors may consider a specific allocation to India as it has overtaken China to become the world’s fastest-growing major economy and is set to outperform China for some time.”
Siva pointed to the latest survey by SuperConcepts for March 2017, which found 13 per cent was allocated to international shares.
“SMSF investors currently have little to no exposure to India,” he said.
“Of this 13 per cent, only a small amount would go to emerging markets strategies, and of that only a small amount would go to India.
“They are missing the opportunity for growth via dedicated approaches, which are structured to get the most out of India – the emerging markets funds which do allocate something to India generally only invest in the top few stocks, which doesn’t reflect the real growth story.
“India is a market where investors are rewarded by active management and by looking outside the top 20 stocks.”
SMSF advisers may also appreciate the diversification potential of India, he noted.
“India acts as Australia’s opposite. When commodity prices fall, the Australian economy and stock market slow, yet the Indian economy, currency and equity markets tend to thrive,” he said.
“India is one of those economies where high GDP (gross domestic product) growth has translated to higher corporate earnings.
“These genuine high-growth companies, driven by top-line revenue increases, are scarce in Australia’s equity markets.
“The Indian economy also has significant exposure to sectors that Australia doesn’t, like healthcare, consumer and IT stocks.”