The Hindu Business Line : Fidelity funds' exposure to Indian equities limited

INDIA does not seem to rank very high on the agenda set by Fidelity, the US asset management group, that many feel will start its operations locally. Its funds, barring a few exceptions, are generally providing far more weightage to other emerging markets at this juncture.

While a number of Fidelity funds hold positions in select Indian equities, securities from countries such as South Korea, Brazil and Taiwan figure more prominently in their portfolios. Fidelity's Aggressive International Fund, Overseas Fund, Pacific Basin Fund and Southeast Asia Fund have all some exposure to India — mostly quite limited.

Fidelity Aggressive International Fund, in which India accounts for 10.8 per cent of the portfolio, seems to be an exception here. For Overseas Fund and Pacific Basin Fund, however, this comes down to 2.1 per cent and 2.7 per cent, respectively.

The Southeast Asia Fund (which normally allocates at least 80 per cent to countries in the region) had in recent times taken a huge bet on South Korea, which makes up over 30 per cent of its assets, according to the latest holding statement.

This is followed by Hong Kong, Taiwan, Thailand and Singapore. China and India account for merely 4.2 per cent and 2.8 per cent, respectively. It may be mentioned here that Infosys is among the fund's largest holdings.

`Emerging markets', according to the fund house, include nations that conform to a definition by Standard & Poor's and nations with low- to middle-income economies as classified by the World Bank. Fidelity Emerging Markets Fund, which usually takes an 80 per cent exposure to such markets, follows a diversified strategy that has led it to countries such as South Korea, Brazil and Taiwan.

The group's views on these countries and others seem to stem from its belief that non-US investments are essential for diversification and risk management. Fidelity investors are informed that the US listed equities account for merely about 31 per cent of the world's stocks and that half of the world's largest public companies are located outside the US.

"Markets tend to move in cycles — through both good times and bad. In two of the three past decades, international indexes showed higher returns than the US markets. International investing entails greater risk, as well as greater potential rewards compared to US investing", Fidelity has stated, adding that these are magnified in emerging markets, since these countries may have relatively unstable governments.