Vikram

A broader investment universe, the chance to invest in unique “plays” that are not available in the Indian market (such as gold mining companies, or hardware majors) and the superior performance of other emerging markets are factors that certainly do make a case for you to look at overseas investing option.

There are a couple of funds in India now that invest in international markets, Kotak Global Emerging Market Fund being the latest new fund offer to join the bandwagon. There are no funds that focus on the BRIC Countries alone, although they all have an “emerging markets” thrust and therefore, automatically include the four countries in their investment radar.

As a rule, we do not advocate investing in new fund offers or in those funds that do not have a long track record of performance. None of the international funds launched so far have a track record of greater than a year. In the case of Sundaram Global Advantage, however, you also need to be cognizant of its differences from the other international opportunities funds.

The most significant difference lies in the investment mandate. Global Advantage plans to invest not just across emerging equity markets, but will also offer an exposure to commodities and real estate asset classes. As such, the fund will not be strictly comparable with funds that offer a pure equity exposure.

The real estate and commodities component of the fund will be passively managed by taking exposure in exchange traded funds. All investments will be routed through FundQuest, a unit of BNP Paribas, which will dynamically allocate money across asset classes and also select funds through which it will implement the proposed asset allocation. So performance of this fund will depend upon FundQuest’s ability to make the both the right asset class and the right fund choices.

Another factor you will have to consider is that Sundaram Global Advantage will also not qualify as an equity fund in India, unlike funds such as Templeton India Equity Income and Fidelity International Opportunities, which invest only 35 per cent of their assets overseas — at least 65 per cent of the assets must be invested in domestic equities for a fund to be treated as an equity fund and be eligible for equity-related tax benefits. Unless you are really keen on a significant international markets exposure, you might not want to lose out on the tax benefits associated with equity funds.

Given the breadth of the investment objective, we would wait to evaluate Sundaram Global Advantage’s performance over a period of time before we recommend an investment in the fund.

Shanthi Venkataraman

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