- What is GLIN’s investment strategy?
- What is GARP investing?
- How does GLIN’s index identify attractive growth opportunities at a reasonable price?
- Why does GARP investing make sense in India?
- What are the characteristics of GLIN’s index compared to benchmark indexes?
- How does GLIN fit within a client’s overall portfolio?
- How can investors buy VanEck ETFs?
What is GLIN’s investment strategy?
VanEck India Growth Leaders ETF (GLIN) seeks to replicate the MarketGrader India All-Cap Growth Leaders Index. The Index selects fundamentally sound India companies with attractive growth potential at a reasonable price. This is often referred to as growth at a reasonable price, or GARP, investing.
What is GARP investing?
GARP, or Growth at a Reasonable Price, is an investment strategy that combines aspects of both growth and value investing to approach stock selection. The GARP approach identifies companies with strong growth characteristics (or those exhibiting strong earnings and revenue growth) with prices that do not reflect excessive optimism, potentially offering a better risk/reward profile compared to focusing only on growth or value.
Essentially, GARP investing aims to avoid the extremes of investing solely for growth (which can lead to paying too much for a stock) or investing solely for value (which can lead to missing out on growth opportunities or investing in lower quality companies).
How does GLIN’s index identify attractive growth opportunities at a reasonable price?
To start, the index provider (MarketGrader) gives each eligible Indian company a proprietary score based on fundamental inputs. A stock’s score is based on publicly available data and is sourced across 24 different metrics, which measure Growth, Value, and Quality (cash flow and profitability). By weight, the order of importance in calculating the score is Growth, then Value, and then Quality. Stocks with high scores typically exhibit GARP characteristics, while stocks with low scores may have low growth, high valuations, or some combination of the two.
Source: VanEck, April 2024.
The index then selects the top 80 stocks by rank and weights them according to market cap, and rebalances semi-annually.
Why does GARP investing make sense in India?
We believe that India presents a compelling investment opportunity for investors looking to participate in the emerging markets growth theme. However, India’s valuations may give pause to some investors, as they currently remain elevated compared to a 20-year historical average.
India’s Valuation Is Near 20-Year Highs
Source: Factset as of 3/31/24. Past performance is no guarantee of future results. At the end of March, GLIN’s trailing 12-month P/E sat just under the long-term valuation average of the MSCI India Index. By investing in GLIN, investors can potentially sidestep valuation concerns while still participating in a dynamic growth opportunity.
What are the characteristics of GLIN’s index compared to benchmark indexes?
The rules-based index driven by fundamental input will include strong growth, good value and high quality names, and excludes weak growth, bad value, and low quality names.
The underlying GARP methodology, which drives the strategy, leads to portfolio characteristics that deviate from the MSCI India Index. GLIN’s index has higher sales and EPS growth, a lower P/E ratio, and a much smaller percentage of PEG. A popular way to measure GARP within a portfolio is to examine the PEG ratio. PEG ratio is a measure of valuation (P/E) divided by a growth metric. A PEG ratio under 1 typically indicates that a portfolio is providing relatively attractive value for a given unit of growth. Finally, a much smaller percentage of the portfolio has negative EPS growth.
| Characteristic | MarketGrader India All-Cap Growth Leaders Index | MSCI India Index |
| Sales Growth | 20.2% | 15.8% |
| EPS Growth | 29.4% | 19.6% |
| PEG | 0.8 | 1.4 |
| Forward P/E | 18.0 | 23.8 |
| P/B | 3.8 | 4.4 |
| Negative Sales Growth (% of Index) | 2.5% | 5.1% |
| Negative EPS Growth (% of Index) | 12.4% | 19.1% |
Source: VanEck, Bloomberg as of 3/31/24.
Forward P/E represents the weighted harmonic mean of 12-month Forward Price to Earnings Ratio. P/B represents the weighted harmonic mean of the Price to Book. Sales Growth represents the weighted harmonic mean of sales growth over the previous 12 months. EPS Growth represents the weighted harmonic mean of EPS growth over the previous12months. PEG represents the weighted harmonic average of each constituent’s Trailing 12 month Price to Earnings Ratio divided by its sales growth over previous 12 months. Negative Sales Growth and Negative EPS Growth represents the weighting of the portfolio consisting of stocks with negative sales and EPS growth.
Overall, we believe that a GARP approach is a suitable way to tackle investing in a market that may exhibit lofty valuations.
How does GLIN fit within a client’s overall portfolio?
Depending on an individual client’s risk profile, GLIN can be used as a complement to a core emerging markets equity strategy to boost Indian equity exposure, while simultaneously side-stepping potentially excessive valuations. Clients may also consider using a core/satellite approach to investing in India by using GLIN as the core portion and the VanEck Digital India ETF (DGIN) as the satellite. DGIN provides targeted exposure to the Indian digital economy and does not incorporate any GARP methodology. By using these two strategies together, clients can access the broad economic opportunity set within a valuation-sensitive framework, while also participating in a promising area of growth within the Indian economy.
| Average Annual Total Returns* (%) as of March 31, 2024 | |||||||
| 1 Month | 3 Month | YTD | 1 Year | 3 Year | 5 Year | 10 Year | |
| GLIN (NAV) | -0.92 | 7.27 | 7.27 | 48.59 | 12.19 | 2.24 | 3.81 |
| GLIN (Share Price) | -0.84 | 7.04 | 7.04 | 49.64 | 12.56 | 2.31 | 3.77 |
| MGINGRNR (Index) | -1.86 | 7.50 | 7.50 | 52.71 | 13.56 | 4.14 | 4.74 |
| Performance Differential (NAV – Index) | 0.94 | -0.23 | -0.23 | -4.12 | -1.37 | -1.90 | -0.93 |
* Returns less than one year are not annualized.
Index data prior to May 1, 2020 reflects that of the MVIS India Small Cap Index (MVSCIFTR). From May 1, 2020 forward, the index data reflects that of the Fund’s underlying index, the MarketGrader India All Cap Growth Leaders Index (MGINGRNR), and is not intended for third party use.
The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.
Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, taxes and extraordinary expenses) from exceeding 0.70% of the Fund’s average daily net assets per year until at least May 1, 2025. During such time, the expense limitation is expected to continue until the Fund’s Board of Trustees acts to discontinue all or a portion of such expense limitation.
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This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
An investment in the VanEck India Growth Leaders ETF (GLIN) may be subject to risks which include, but are not limited to, special risk considerations of investing in Indian issuers, foreign securities, emerging market issuers, foreign currency, depositary receipts, information technology sector, basic materials sector, health care sector, energy sector, industrials sector, micro-, small- and medium capitalization companies, cash transactions, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversification and index-related concentration risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks. Micro-, small- and medium capitalization companies may be subject to elevated risks.
MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index and/or its trademark or the Index Price at any time or in any other respect. MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that MarketGrader India All-Cap Growth Leaders Index is calculated correctly. Irrespective of its obligations towards MarketGrader, Solactive AG has no obligation to point out errors in MarketGrader India All-Cap Growth Leaders Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of MarketGrader India All-Cap Growth Leaders Index by Solactive AG nor the licensing of MarketGrader India All-Cap Growth Leaders Index or its trademark for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.
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