Mutual Funds

Don’t go overboard on global funds

Anand Kalyanaraman | Updated on March 10, 2014



Diversified schemes deliver, gold and other commodities take a beating

In a year that saw many domestic funds deliver lacklustre returns, investors in international funds — those that put money in foreign equity and overseas mutual funds — would likely be smiling.

The rupee’s rout against major global currencies last year has boosted the returns of many of these funds. Dollar-denominated funds would have gained nearly 13 per cent.

With signs of an economic turnaround, the US benchmark index, Nasdaq, gained nearly 36 per cent over the last year. The broader S&P 500 gained 21 per cent. European indices, such as the DAX, CAC 40 and FTSE 100, are also up 7-25 per cent.

Global funds that invest in US/European stocks or mutual funds have been stellar, thanks to the double benefit of favourable currency movements and healthy stock performance.

The best fund in this category — FT India Feeder - Franklin US Opportunities, which was launched just a couple of years back — is up more than 50 per cent over the last year.

Handsome gains in stocks such as Gilead Sciences, MasterCard and Google held by the main US-based fund also helped the India-based feeder fund .

Other funds which notched up strong gains (30-44 per cent) include ICICI Prudential US Bluechip Equity Fund, DSP BlackRock US Flexible Equity Fund, DWS Top Euroland Offshore Fund, and Birla Sun Life International Equity - Plan A.

Funds which have been around for a few years, have managed healthy 14-19 per cent annualised returns over three-year and five-year periods.

Funds such as JPMorgan JF Greater China Equity Off-Shore and Mirae Asset China Advantage Fund also did quite well with one-year gains of about 22 per cent.

Interestingly, unlike most Indian energy funds, DSP BlackRock World Energy Fund put up a good show with 27 per cent gains last year.

Some losers too

But not all global funds emerged winners. The losers over the last year include funds that invest in gold and Latin American countries. With gold price falling sharply, funds such as DSP BlackRock World Gold Fund and PineBridge World Gold Fund are down 11-17 per cent over the past 12 months.

Also, with indices in emerging markets such as Brazil taking a knock due to economic troubles and the US Fed ‘taper’ fears, funds such as HSBC Brazil Fund and ING Latin America Equity Fund lost 11-17 per cent last year.

The three-year performance of these Latin American funds is also sedate , though they managed decent five-year returns from the lows of early 2009.

Global gold funds, though, have disappointed over the five-year period too. International funds such as Mirae Asset Global Commodity Stock Fund that invest in commodities also did not fare well, losing more than 3 per cent last year. But if the rupee strengthens, such funds will lose. So, go abroad but don’t go overboard — restrict exposure to 5-10 per cent of your portfolio.

Published on March 09, 2014

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