India is like a Disney world of impact investment – experts at the CFA Society India conference

 

Mumbai : “India is like a Disney world of impact investment”; “The country is among the most attractive emerging market, based on its economic growth, demographics, value-added sectors, as well as its shift towards a more open market-based economy”. These were among the expert views at the 12th India Investment Conference, hosted by the CFA Society India, a global association of investment professionals, on January 21st and 22nd, 2022.

 

Rajendra Kalur, CFA, Director, CFA Society India noted the impressive speaker line-up in the 12th edition and the year’s conference theme – “Investing in an era of disequilibrium”. “After more than a decade of record-low-interest rates, we are at an inflection point due to inflation – which is a ticking time-bomb ready to explode. We are also seeing a growing shift towards investing in private markets, as well as investors focusing on climate change ESG and socially responsible investing. How does this impact investing investment managers? and more importantly, how does this shift and the recent supply bottlenecks affect investors? A clear sign that we are living in times of disequilibrium”, he said.

 

Experts bullish about India

Lauren Templeton, Founder & President, Templeton and Phillips Capital Management, LLC said “India has many attractive features for long-term investors – it combines a low per capita income, a young population, and a heavier presence of high margin, asset-light firms in the technology sector”. As an example, India’s per capita income is $6,390 compared with $17,200 for China. “When countries experience economic growth from a low base, the creation of wealth among their citizens is transformative to the economy (much like China’s 20 years ago)”, she said.

 

Turning to demographics, India may be the best-positioned country in the world. India’s median age is 28.4 versus 38.1 in the U.S., 38.4 in China, 42.5 in Europe, and 48.4 in Japan – and the lower median forbodes well for economic growth. India’s technology sector is well developed and represents 7.7% of GDP compared with 5.5% in the U.S. She believes that technology will continue to be a source of economic growth and productivity in the years to come, and the country has a strong foundation in this sector.

 

Can impact investing generate alpha?

Hector Gomez Ang, Regional Director, South Asia, IFC, explained how impact investment is an investment mindset and depending on the problem, a suitable capital source is allocated. Impact investors have an intent for social and environmental goals, have a narrative, and have a system of outcome measurement. Impact investing, he says, would play an important role in meeting sustainable development goals. Gender is a key theme and evidence-based studies have shown that women-led enterprises generate higher returns and score high on various ESG metrics. In terms of numbers, USD 770 billion can be added in 2025 to India’s GDP by closing the gender gap.

 

He noted that as of June 2019, IFC’s portfolio of equity investments had outperformed S&P 500, MSCI World Index & MSCI Emerging markets index across a longer time frame – proof that impacts investing can generate alpha. He shared that IFC had invested USD 1.614 billion in India in 2021. One of the challenges he sees for impact investment in India is limited exit opportunities and he opined that a social exchange can potentially help address this.

 

Impact of China

Xu Sitao, Chief Economist, Deloitte, China, observed how China is driving regional trade and prices of global commodities and explained how its interest rate cuts will have ramifications for the global economy and financial market. He expected China to loosen its monetary policy, use fiscal policy in a bold manner, and make exchange rate more competitive. He thinks policy risk or policy errors is something China must pay more attention to.

 

How the World’s Greatest Investors Win in Markets & Life

William Green, Author of “Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets & Life” said that “Greatest investors stand apart from the crowd; they are mavericks and free thinkers. Great Investors value businesses and buy them at a price that is less than what it is worth. One needs to focus on valuation – an essential rule of the game. And knowing when to sell is excruciatingly difficult. The beauty is to find something you love; which will continue to compound and hold on to it for years”. He added that in this dynamic environment, finding something to hold for decades is THE most challenging part. He thinks that Investing is emotionally challenging and hence it is important to find a way to build Emotional Resilience. It is best to avoid decision making when you are hungry, angry, sad or stressed.

 

Speaking at the 12th India Investment Conference, Vidhu Shekar, CFA, CIPM, Country Head, India, CFA Institute said, “We are in an era of disequilibrium where a small shock can start a chain of events that leads to significant changes in economies and markets. The rise of China, long term impact of the pandemic, stronger than expected inflation in the developed world, and the impact of climate change are some issues that speakers covered at the conference. The outlook for India is challenging yet promising, and we hope that the investment community gained additional perspective and insights from the conference that will help them serve their clients effectively in 2022.”

 

There were four sessions in the 12th edition of the India Investment conference. Investing the Templeton Way in a Post Covid world featured Lauren Templeton, Founder & President, Templeton and Phillips Capital Management, LLC and moderated by Sunil Singhania, CFA, Founder, Abakkus Asset Manager LLP; The Traits, Strategies, Habits, and Principles of Winning Investors featured William Green, Author of “Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets & Life” and moderated by Durgesh Shah, Catalyst, FLAME University; Impact investing in a Turbulent Market featured Hector Gomez Ang, Regional Director, South Asia, IFC and moderated by Ashu Suyash, Entrepreneur and Independent Director ( Ex MD & CEO CRISIL); and China in the Post-Covid Era: Global & Regional Implications featured Xu Sitao, Chief Economist, Deloitte, China and moderated by Neelkanth Mishra, Managing Director, Co-Head of Equity Strategy, Asia Pacific and India Equity Strategist, Securities Research, Credit Suisse.

 

The virtual conference provided an excellent opportunity for over 1000 registered delegates to learn and network with some of the best minds in the industry and fellow CFA® charterholders.