The Hindu Business Line : Very few MFs keen on overseas markets

Are mutual funds in India a bit too slow in considering investment in other markets, the recent regulatory impetus notwithstanding? No, not when you can spot a few fund houses lately showing a little more than passive interest in this matter.

Some players have in recent days spoken out strongly in favour of investing abroad. Certain others are said to be readying offer documents for funds that will invest beyond the country's borders. Prudential ICICI MF has for its part mooted what has been named `Asian Equity Fund', which will partly look at opportunities arising in the Asia Pacific region.

Wide opinions

We nosed about a bit to find out what investment circles felt about it all; the exercise threw up quite a few interesting issues. For you, we present these in brief. The first thing that some sections referred to was the "potential" of some of the overseas markets, including a few in the Asian continent.

Apparently, there are a number of sectors emerging as major investment destinations in key economies. People who mentioned the continent in general picked up names such as South Korea, Malaysia and Taiwan. These were over and above such BRIC nations as China and Russia.

The other significant issue that evolved stemmed from the belief that India is still a very crucial bet, perhaps the most important bet, insofar as opportunity-seekers are concerned.

"Our companies are doing so well... do you have to go out necessarily and invest in markets that you may know little about?" is the essence of this argument.

A third bloc of opinion, however, drew strength from the fact that investing abroad will reduce single-country risk. Obviously, diversifying across borders has its points and local fund houses, it is argued, need to spread it out a bit more thinly.

Going back to the Pru ICICI proposal, the fund in question will be an open-end product, aimed at generating long-term capital appreciation by investing in equity and equity-related securities, and units of equity funds.

It now needs to be seen whether other players come up with similar offer documents. Mind you, there have been minor efforts in the past to dabble in international investments. Franklin Templeton already has a product that invests in units of an US-based government securities fund. Principal Financial in India has a small fund that allocates its portfolios to international securities.

Not long ago, top player UTI MF (strengthened by a tie-up with State Street Global Advisors) wanted to track indices like Dow Jones Global Titans 50 in its bid to go international in a limited way. Also, remember, DSP Merrill Lynch MF has recently worked out a proposal based on a gold fund run by ML abroad.

Some of these are, if you allow us to characterize them loosely, essentially ideas that are couched in other ideas. Given this backdrop, it is time for the local funds industry to truly graduate, step into the next level. May be, one day, there will be a large Indian asset management company or two investing seriously abroad, including in exotic markets. May be, a simple Indian worker will go to his neighbourhood distributor - a PSU bank branch? - to buy a fund that invests actively in securities of companies based in Japan, Brazil, Ireland and elsewhere.

Feedback may be sent to nilanjan@thehindu.co.in

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