The Hindu Business Line : AIG Infrastructure and Economic Reforms Fund

From (L) Mr Saurabh Sonthalia, CEO, AIG Global Asset Management, Mr Sunil Mehta, Country Head and Chief Executive, American International Group, India and Mr Markus Schomer, Managing Director, Global Economic Strategist, AIG Investments, New York, at the launch of AIG Infrastructure and Economic Reform Fund in Chennai last week.

Vidya Bala

Investment Proposition: Increased infrastructure spending undertaken by the Government jointly with the private sector has heightened the prospects for infrastructure companies and sectors that are involved in building infrastructure. Added to this, economic reforms that focus on a more free market model have expanded the opportunities for some industries. This fund seeks to capitalise on both.

The fund: AIG Infrastructure and Economic Reforms Fund is an open-ended equity fund that aims to invest in companies that are likely to benefit from the above-mentioned issues. This includes sectors such as cement, metals and capital goods. Identification of economic reforms early on and the opportunities they would create for such sectors as banking or financial services, retail and investment is also one of the fund’s objectives.

Risk profile: Given the above investment strategy, the fund’s universe appears more diversified than regular theme funds and may therefore carry lower risks than concentrated sector funds. Nevertheless, the fund would call for more active entry and exit strategies by an investor than warranted by diversified equity funds. The fund could at best be a diversification option for the portfolio.

Pros and cons: A good number of existing funds with an infrastructure/capital goods theme do have a broad based investment universe in their mandate. For instance, Tata Infrastructure has substantial exposure to metals and financial services. There are also funds that seek to capitalise on opportunities that arise from capex spending.

AIG Infrastructure’s key distinguishing feature may be its plan to identify companies that have ‘multi-year opportunities’ that would outlast the primary infrastructure development. These companies may participate in infrastructure building but later branch out to complementary areas once the primary infrastructure needs are met.

However, given the plethora (over 15) of funds with a broadly similar theme now available in the market, AIG may at best be one more option in the space for now. Funds that entered at an early stage of the infrastructure spending by the Government have been the ones that have delivered the best performance. The fund house also has a limited track record in India, managing one diversified equity fund, AIG India Equity launched in May 2007.

Details: The offer closes on January 31. Mr Tushar Pradhan is the manager.

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