The world’s largest distress asset management company run by one of the most popular names in the world of investing, Howard Marks, exited its entire position in the iShares MSCI India ETF in the quarter ended June, recently filed SEC filings showed
In the June quarter, Oaktree Capital sold its 86,900 units of the iShares MSCI India ETF that provided it passive exposure to the MSCI India index, the flagship index for foreign investors looking for exposure to Indian equities.
The fund’s exit from the iShares MSCI India ETF does not have a bearing on its direct investments in India’s debt and private equity market, where its presence remains substantial.
Oaktree Capital’s complete exit from the Indian exposure may come across as a surprise, given that the alternative investment company had increased its exposure to the MSCI India ETF in the March quarter after trimming it substantially in the December quarter of the previous financial year.
That said, the exit may have been driven by concerns surrounding India’s economy in the wake of the devastating second wave of the Covid-19 pandemic that had submerged the country during the June quarter, leading many to doubt the economic scar it will leave behind.
In hindsight, Oaktree Capital’s exit from the iShares MSCI India ETF could have been short-sighted given that the exchange-traded fund has risen more than 12 per cent since the end of June, driven by inflows from retail and foreign portfolio investors.
Oaktree Capital, however, made a killing last year after it increased its position in the ETF by 27 per cent in the March quarter of 2019-20, which saw the dreadful crash in March due to the onset of the pandemic and imposition of one of the world’s harshest lockdowns.
Further, Oaktree Capital enhanced its exposure to the MSCI India ETF by another 26.3 per cent in the June quarter of 2020-21, as the Indian equity market staged a remarkable comeback post the March crash. That position was downsized in the subsequent quarter as the fund booked profit.
The shift in positioning of Oaktree Capital on India equities reflects the fund’s own philosophy, one of thriving in picking up opportunities in times of extreme distress in the global economy, such as during the pandemic and the great recession of 2008-09.
In a recent newsletter to investors, Howard Marks said that he is on the hunt for “hidden gems” in places like India, China, Europe and Latin America after raising $15 billion last year to capitalise on the asymmetric opportunities created by the pandemic.
