Overseas Mutual Funds: International funds or overseas fund funds invest in international equity markets.
International Equity MF: International funds or overseas fund funds invest in international equity markets. The investment of these funds is mainly in equity. They also invest in debt and other asset classes such as commodities, real estate etc. According to SEBI regulations, mutual funds that invest more than 80 per cent in equity or equity related instruments of other countries fall under the category of international funds. Apart from giving an opportunity to invest in the global market, these funds also help people to achieve geographical diversification and sometimes act as a hedge if there is a decline in domestic currency. In the last 5 years, international mutual funds have given up to 32 per cent returns.
Money increased by 4 times in 5 years
Edelweiss Greater China Equity of Shore Fund
5-Year Return: 32%
Value of 1 lakh in 5 years: 4 lakh
Minimum investment: Rs 5000
Assets: 1033 crores (January 31, 2021)
PGIM India Global Equity Opportunity Fund
5 year return: 27 percent
Value of 1 lakh in 5 years: 3.28 lakh
Minimum investment: Rs 5000
Assets: 769 crores (January 31, 2021)
Franklin India Feeder Franklin US Opportunity Fund
5 year return: 25 percent
1 lakh value in 5 years: 3.08 lakh
Minimum investment: Rs 5000
Assets: 2733 crores (January 31, 2021)
ICICI Pru US Bluechip Equity Fund
5-Year Return: 19%
Value of 1 lakh in 5 years: 2.40 lakh
Minimum investment: Rs 5000
Assets: 1075 crores (January 31, 2021)
(source: value research)
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Manifold market from India
India may be included in the top 5 major economies, but India’s GDP is only around 3 percent of the world’s GDP. That is, we ignore about 97 percent of the market. Through international mutual funds, investors can take advantage of the market manifold from India. Through this, you can invest directly in global equities. Investing in these makes the portfolio of any investor diversified, which helps in reducing the risk. Many times, if there is a decline in the domestic currency, then it acts as a hedge. For this reason, the attractiveness of investment at the international level is increasing. Investing in these funds is seen in the same way as investing in a domestic fund. Liberalized Remittance Scheme (LRS) is not applicable to these.
But keep these things in mind
If you have invested money in the equity market of a country, then any negative issue in that country may affect your investment. Therefore, before investing money, gather information about the risk associated with the country associated with the fund. The movement in the currency has an impact on their returns. For example, if the rupee is strong then the returns of these funds may decrease. At the same time, their returns can increase due to the weakening of the rupee. The applicable NAV comes after one day, there is a risk of currency, if kept below three years, long term capital gains tax is imposed.
Investment method
Some international funds invest directly in international equities. At the same time, there are some funds which invest in international index such as Nasdaq or S&P 500. There are also some who act as feeder funds and invest in an identifiable mutual fund in the international market. Then there are Fund of Funds which invest in units of International Funds.
(Note: BPN based on discussions with Fincap Director AK Nigam)
