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Indian investors’ appetite for higher returns and diversification seems to know no boundaries, literally. With domestic equities getting more and more pricier, a growing number of Indian investors are now turning their focus on stocks of foreign companies through International Mutual Fund schemes.
According to the latest Association of Mutual Funds in India (AMFI) data, the assets under management (AUM) of Indian investors in the Fund of Funds investing overseas have grown more than 300 per cent to ₹12,407.9 crore as of March 2021. The AUM at the end of the previous fiscal stood at mere ₹2,734.4 crore. At the end of June quarter, the AUM further went up to ₹17,863.8 crore.
Fund of Funds (FoF) is a mutual fund scheme that invests in existing mutual fund schemes. FoFs overseas invests in units of offshore mutual fund schemes.
These can be region or country-focussed funds such as Edelweiss AMC’s Greater China Equity Off-Shore Fund and Nippon India US Equity Opportunities Fund or sector-specific funds such as Invesco India’s ‘Invesco Global Consumer Trends FoF’ and so on.
The outstanding folios under Fund of Funds investing overseas have also jumped by 267 per cent to 6.97 lakh as of March against 1.90-lakh during the same period in the previous fiscal.
Factors driving growth
Industry experts say that diversification, access to emerging technologies and big tech companies, and to some extent the currency risk advantage are some of the major factors driving the growth of international mutual fund investment.
“We are getting a lot of queries on our global funds. I think people want to diversify abroad because they realise the value of diversification,” Radhika Gupta, MD & CEO of Edelweiss AMC, told BusinessLine earlier.
She also added that access to Big Tech companies such as Facebook, Netflix and Apple and access to emerging themes in technology and pharma are the other reasons for growing investor interest.
Retail & HNIs
As of March 2021, retail investors and high net worth individuals (HNIs) account for 85 per cent of the total assets under the overseas FoF. Of the total AUM of ₹12,408 crore, these two investor categories alone hold ₹10,506 crore while corporate AUM stood at ₹1,900 crore accounting for 15.3 per of total AUM.
“If you see, the overseas funds, especially the US funds, have delivered a terrific performance in the last 5-10 years. Unfortunately, India has not done well on the equity side in the last decade,” Pratik Oswal, MD & CEO, Passive Funds Business, Motilal Oswal AMC, said in an earlier interaction.
“On a long-term perspective, I think diversification is the main reason but in the short term, this trend has to do more with people trying to make the most out of the high return in the last 3-4 years,” he added.
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