HEAD-TO-HEAD: First State versus JP Morgan

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Source: FE Analytics. Three-year cumulative returns in US dollars.

Performance

There are no reservations about the First State fund’s performance, past or present.

“It has consistently beaten its peers and its index, generating strong returns in all market conditions,” said Nel.

Agarwal has delivered for investors over the long term. Since he took control of the portfolio in August 2012, through September 2018, the fund’s 15.52% annualised gain beat the MSCI India Index’s 8.16% gain as well as 96% of its India equity Morningstar category peers.

“Agarwal’s disciplined focus on top quality stocks has invariably paid off,” Nel said.

The JP Morgan fund has struggled over the last three-and-a-half years, and has returned less than both its peer group and index for each discrete period.

“Its lumpy performance is a function of the concentrated nature of its portfolio,” said Nel.

Part of the reason is the managers’ decision not to hold two of the largest cap stocks in the Indian market. They reckoned one was “insufficient quality”, and the other was “simply too expensive”.

Unhappily for them, both stocks have had long and strong performance.

“This recent poor record contrasts with the fund’s superior performance in the calendar year 2014, when it outstripped both benchmarks. Its earlier history is also more successful,” said Nel.

“The strategy has delivered decent returns since Shroff became a manager on 1 June 2003,” he pointed out.

“Through to 31 May 2019, the fund returned 15.51% annualised, beating the MSCI India 10/40 by 109 basis points and ranking in the 40th percentile among India equity peers,” he said.

Discrete annual performance

 Source: FE Analytics. Annual returns in US dollars.

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