The Hindu Business Line : Indian mutual funds shop globally to woo locally

miners, property REITs in Hong Kong — these are some of the investment options that could be on your menu, if you’re looking for new alternatives to domestic equity funds.

With the four-year bull-run in domestic stocks faltering, Indian fund houses are stepping up efforts to woo investors to ‘global’ funds — schemes that invest in stocks or other assets outside India. The number of global funds available to Indian investors today stands at 16, with as many as 13 fund houses now featuring a global product in their menu.

While the global funds launched earlier had focused on foreign stocks, usually from the high-growth emerging markets in Asia, the recent ones promise entry into new asset classes not readily available to Indian investors — precious metals and gold mining companies, natural resources, commodities and global real estate. What do these global funds offer that domestic funds don’t? Global equity funds such as the Templeton India Equity Income Fund or the Fidelity International Opportunities tap their global research teams to buy stocks from new sectors or themes that aren’t well represented in the Indian listed space.

Retail, consumer electronics and natural resources are key sectors in which these funds shopped overseas for global flavour. Lukeoil (Russia), United Microelectronics (Taiwan), Samsung Heavy Industries (Korea) were some of Templeton’s holdings in its latest portfolio, while Fidelity featured picks such as LG Household, Rio Tinto (Australia) and Macquarie (Australia).

On the other hand, fund houses such as Kotak Mutual have used the ‘feeder’ fund route to allow Indian investors to access a recognised global manager. Investments into Kotak’s Global Emerging Markets Fund ‘feed’ into the T.Rowe Price Global Emerging Markets Fund, which has managed a 32 per cent return over a 10-year period. “We were best suited to identify investment opportunities in Indian markets and were on the lookout for a global portfolio manager with an established track record of managing funds overseas,” explains Ms Lakshmi Iyer, Vice-President - Products, Kotak Mahindra AMC. T.Rowe Price, with $350 billion assets under its fold, fits the bill.

Feeder funds have also been used to tap into new asset classes such as gold or property overseas. DSP ML now offers two global funds that invest in foreign funds managed by BlackRock, a market leader in natural resources with a $42- billion portfolio. ING Global Real Estate Fund, also a feeder fund, features investments in REITs and property developers in the US, Australia, Hong Kong and Japan.

“When we looked at our menu of global products, real estate was the obvious choice. Real estate carries volatility half that of equity, while returns (from real estate) are three times that of bonds. ING is also the undisputed leader globally in managing real estate,” says Mr Vineet K. Vohra, MD and CEO of ING Investment Management India.

So, have global funds delivered better returns than their India-specific peers? Given the turmoil in Indian stock markets since January, many global funds have fared better than local equity funds this year. But this isn’t long enough to establish if returns are sustainable. However, as Mr Vohra says: “Overseas investing is about diversifying risk and not always about enhancing your opportunity or returns.”

Related Stories:
Birla Sun Life launches global fund
Kotak AMC launches global fund

More Stories on : Mutual Funds | Overseas Investments

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