Stewart Investors Indian Subcontinent All Cap
Previously Stewart Investors Indian Subcontinent Sustainability
Stewart Investors Indian Subcontinent All Capfund invests in companies which are either based in, or have major operations in India, Pakistan, Sri Lanka or Bangladesh. That said, the vast majority of investments are in India. The fund focuses on long term opportunities in resilient, cash-generative, and sustainable businesses.
Previously Stewart Investors Indian Subcontinent fund.
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Sashi Reddy, Lead Manager Sashi Reddy joined Stewart Investors in August 2007, where he generates investment ideas for the Sustainable Funds group. With 15 years of experience, including 12 years in financial services, he previously worked at Irevna Research from 2005 to 2007. Sashi holds an engineering degree from the National Institute of Technology, Trichy, and an MBA from the Schulich School of Business, York University in Toronto.
David Gait, Deputy Manager David is Head of the Sustainable Funds Group and a Portfolio Manager at Stewart Investors, where he has been since 1997. He manages the Asia Pacific Leaders Sustainability, Asia Pacific Sustainability strategies, and the Pacific Assets Investment Trust. David is also a member of the Stewart Investors Board. He holds an MA with honours in Economics from Cambridge University and a Master of Science in Investment Analysis from Stirling University.
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Investment process
The Stewart Investment philosophy is all about stewardship and long-term thinking - finding the right type of very high-quality businesses with good governance and management and then holding them for the long term. Capital preservation is critical.
The team tries to ignore the day-to-day volatility of the stock market and focuses on owning good quality businesses with strong balance sheets which will ultimately do well over time. Most firms do not meet the fund’s quality criteria meaning it is very different to the index. Valuation is a secondary concern to finding the right companies.
The team looks at quality in three ways. Firstly, management – it’s competence, integrity, track record and alignment with stakeholders. Secondly the franchise, or that the firm has necessary and responsible products and services with pricing power and sustainable growth. Thirdly the financials: are there resilient cash flows and profit margins and strong balance sheets?
Of these, management is considered to be the most important element of quality. The team must be able to trust management teams as good stewards of its clients’ capital. The team likes to build long-term relationships with company stewards and family owners.
The team prefers more defensive resilient businesses which are generally less affected by the economic cycle. It looks to invest for companies for more than 10 years from the point of investment, although obviously situations can change. There are some stocks in the portfolio which have been there longer than 25 years.
Stewart Investors Indian Subcontinent All Cap is highly concentrated with around 35 stocks. The top ten holdings usually account for more than 40% of the fund’s value. The fund usually has little or no exposure to mining or oil, and generally has an overweight to more defensive sectors such as healthcare or consumer staples.
Risk
The portfolio is concentrated but sensibly diversified to manage risk. While the fund is obviously high risk, it is the least volatile fund in its sector over the manager’s tenure*. It typically gets most of its outperformance in a cyclical downturn and can struggle to keep up when the market is rising quickly.
*FE fundinfo, IA Indian Subcontinent Ratio Table, 1 August 2012 to 3 May 2022
ESG
ESG - Explicit
Sustainability is at the core of Stewart Investors Indian Subcontinent All Cap's investment philosophy and integral to the investment process. The team believes it is an important way to reduce risk and enhance returns over time. Stewart Investors Indian Subcontinent All Cap has a very heavy ESG focus and will only invest in businesses which are contributing to a more sustainable future. All team members must sign their Hippocratic Oath pledging to uphold the principles of stewardship. Consideration of ESG is holistic. There are, however, materiality thresholds for harmful or controversial activities which cannot be passed - 0% for tobacco and controversial weapons, for example. Internal research is supplemented with the ‘Sustainalytics’ tools.
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