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Exposure to India, Japan among key drivers of UniSuper’s FY23–24 result

By Rhea Nath
4 minute read

The Japanese and Indian markets have helped boost UniSuper’s latest annual return.

According to UniSuper’s chief investment officer, John Pearce, investing in the Indian and Japanese markets has contributed to UniSuper delivering a 9.2 per cent return from its default MySuper balanced option in the last year.

Speaking to InvestorDaily, he attributed UniSuper’s strong FY2023-24 result to the two Asian markets and an overweight position in technology.

“We had a nice weighting, which is overweight to tech, overweight to Japan, and overweight to India, so they’re the three things that worked in our favour,” he said.


As at 8 July 2024, the gains posted by the Nikkei 225 Index – a stock market index for the Tokyo Stock Exchange – over the past year stood at 26 per cent, while India’s Nifty 50 Index was up just under 26 per cent. In comparison, the MSCI Emerging Markets Index was up a more modest 12.5 per cent in the year to June 2024.

Looking at the two Asian markets, Pearce said much of Japan’s appeal stems from its reasonable valuations, which are the product of years of underperformance.

“With Japan, even though it’s had a good run, it still doesn’t look expensive because it’s coming from a very low base,” he said.

“Japan’s been in the doldrums for about three decades, so while it’s had a run, it’s really just catching up. It’s finally got to the highs it got to in the 80s.”

India offers a very different proposition, the executive noted.

“India’s a market that actually looks expensive and it stays expensive. You find, with India, you’re constantly waiting for pullbacks to add [to the portfolio] but the market pulls back and then rallies pretty quickly,” he said.

Pearce explained that it’s the small to mid caps that tend to be overvalued in India, hence UniSuper has focused on larger caps, which tend to have much more reasonable valuations.

“We’re certainly more comfortable with the valuations of the large caps in the Indian market,” he said.

Additionally, as market sentiment cools for China, the investment executive identified India as the beneficiary of increased capital flows.

“We do still expect India to be the beneficiary of everyone’s aversion to China,” Pearce said.

“If you want emerging market exposure, an Asian emerging market exposure, there’s still a really deep reluctance to dip the toe in the water in China. So, you’re kind of left with India being not a bad alternative.”

India remains appealing but expensive

In recent months, a number of investment managers have cited “overhyped” valuations in Indian markets as a roadblock.

In June, Anh Lu, lead portfolio manager for the Asia ex-Japan Equity Strategy at T. Rowe Price, said that investors are currently willing to pay a premium for Indian companies.

“With India’s economy recovering strongly after COVID, the best performing part of the stock market has been in the more cyclical areas, particularly in the small- and mid-cap space, where retail investor inflows have pushed the valuations of many stocks to record highs,” she said.

Similarly, Chris Clube, co-portfolio manager of the Federated Hermes Global Emerging Markets Equity Fund, raised concerns that investors are overpaying in Indian, particularly in the small and mid-cap space.

“We find companies whose valuations we simply can’t justify,” he said.

"We love the business, we love the outlook, but we can’t understand how people have managed to convince themselves that this is a great stock purchase opportunity.”

As a result, the portfolio manager explained that the fund is currently sitting a little bit underweight India, while it continues to keep an eye out for any pullback.