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Principal PNB Mutual Fund plans to launch a developed market-focussed fund as part of its effort to provide a diversification opportunity to investors, as well as an emerging market small-cap fund.
The fund house currently has two global funds — Principal Global Opportunities Fund and Principal Asset Allocation Fund of Funds. As of July end, the Global Opportunities fund has delivered a return of 22 per cent in the last one year, while the Asset Allocation fund has given 17 per cent return in the same period.
Lalit Vij, Managing Director, Principal PNB AMC, told BusinessLine that though the market is small for foreign-focussed funds in India there is a lot of opportunity in this as investors can look at it for diversification.
If you compare the growth in the Indian market with that of the US, it may be lower, but foreign-focussed fund have a role to play if it is positioned to right investors, he said.
The global fund to be launched by Principal PNB MF will be a fund of funds and will invest either in funds focussed on the US markets or any other developed market.
Historically, Vij said the rupee depreciation has been 3-4 per cent though it has been pretty strong for the last one year. The global fund has more to do with diversification strategy and investors will also benefit from currency movements.
“We have a similar product focussed on global emerging markets for the last 10 years and it has performed well compared to its benchmark and peers. Now, a fund on developed market would bode well,” he added.
On emerging small cap fund, Vij said the growth in this space is going to be immense with the roll-out of GST and the entire trade getting more organised.
Among emerging markets, Principal PNB expects India and Indonesia to witness good growth though India is currently very small among emerging markets and it is insignificant in the overall AUM of Principal.
Principal PNB Mutual Fund has an AUM of about ₹5,800 crore with strong focus on retail customers. Equity constitutes 57 per cent of the overall AUM and liquid funds accounts for about 16 per cent. Its equity AUM was up by 36 per cent last year while the fixed income asset grew by about 24 per cent.
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