The Hindu Business Line : Franklin India International Fund underperforms against US gilts

FRANKLIN India International Fund, which gives domestic investors access to a portfolio of US government securities, is yet to effectively trail the very fund in whose units it invests.

The performance of Franklin US Government Fund, which has delivered 3.37 per cent in the past one year (as on August 31), is more than just a few notches away from that provided by the scheme offered in India.

The latter has given a negative 1.91 per cent over the same period.

Franklin India International Fund, which essentially buys units of Franklin US Government Fund, has given a negative 0.66 per cent since inception in December 2002.

The corresponding figure for Franklin US Government Fund is 3 per cent.

Mr Ravi Mehrotra, President, Franklin Templeton, explained the fund is suitable for "those who wish to take a currency bet" and create a dollar asset.

Its USP, he added, is not lost, the latest showing notwithstanding.

The scheme - the NAV on September 20 was Rs 9.77 - has an overwhelming part of (over 88 per cent) of its assets invested in Franklin US Government Fund, according to the August factsheet.

The rest was kept in liquid assets, down to 9.88 per cent from 15 per cent-plus in the previous month.

Incidentally, the US fund, launched in the early part of 1991, invests primarily in securities issued or backed by the US government - Ginnie Maes.

The latter carry a guarantee backed by the full faith and credit of the US Government as to timely payment of principal and interest.

Templeton points out that the asset base in question is clearly minuscule (about Rs 1 crore), especially compared to such large funds as Flexi Cap or Bluechip.

Thanks to its size, it has almost entirely escaped the market's attention, with investors focusing generally on equity schemes.

The USP of the scheme that was indicated at the time of its launch is essentially unchanged, Mr Mehrotra felt. Investors, for example, may gain from diversification across the currencies.

Further, they would be able to hedge against any future appreciation of the dollar against the rupee by investing in it.

Expenses on account of, say, education of children based in the US, can therefore be hedged.

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