I’d buy this investment trust, even in a bear market

Why do I invest in investment trusts? Firstly, it’s an easy way to gain access to a diversified portfolio. Secondly, they can give me exposure to investments that would otherwise be inaccessible in a Stocks and Shares ISA.

For example, India doesn’t allow foreigners to invest directly in its stock market, apart from individuals with a net worth surpassing $50m. That’s unfortunate for me as an investor who wants exposure to the Indian economy but does not have $50m. Investment trusts can provide a solution to this problem.

Why India?

India is an exciting long-term investing opportunity because of its predicted economic growth over the next 30 years. By 2050, it should be the world’s third largest economy (currently sixth).

It’s easy to focus on the negatives today. There is soaring inflation, a cost-of-living crisis, the war in Ukraine. The UK could be on the brink of a recession. Yet in India, healthy economic growth is the reality. Annual GDP growth rates of between 6% and 8% are expected over the next five years.

It is also the world’s largest democracy. That’s notable when comparing to another emerging economy: China. Investors in Chinese companies have had a torrid year while stocks have been at the mercy of state intervention. Indian equities do not share this risk.

However, even economies going through rapid growth have not escaped recession in times of global crisis. Additionally, India has large debt burdens to contend with and unique geopolitical risks. India provides an opportunity for long-term growth but it might be a bumpy ride.

My Indian investment trust pick

There are a few India-focused investment trusts traded on UK exchanges. Ashoka India Equity has been one of the top performing. Since its IPO in July 2018, it has returned just over 70% to shareholders. Comparatively, the benchmark MSCI India index has returned 49%. That’s some healthy outperformance. The S&P 500 is up 41% while the FTSE 100 is down 4.7% in that same period.

This performance comes with a fee though. The asset manager takes a 30% performance fee on any performance in excess of the benchmark that Ashoka delivers in terms of NAV. Importantly, this is measured on a three-year basis. That time period means that any outperformance is more likely the result of its analysts’ decisions rather than luck or favourable market conditions. It also means that the interests of the shareholders are directly tied to those of the people managing their money. If one wins, they both do.

Ashoka’s performance in 2022 hasn’t been so impressive, down 15%. However, the long-term fundamentals of its holdings have not changed. Ashoka identifies large-, mid- and small-cap companies with strong cash flows that should be able to survive difficult economic environments. Companies such as Infosys and Asian Paints continue to boast strong earnings growth this year.

As a Foolish investor, I look to invest in great companies for the long term, holding my nerve during market volatility. Despite the many risks, I will be looking to build my position in Indian equities gradually through Ashoka.