Though eight years since Indians have been allowed to invest in stocks abroad, it yet has to catch on. But going by the variety of funds available and the returns they are posting, there could be a change in investor mindset.
Over the years, foreigners flocked to invest in the ‘India growth story’. But in the recent past, there have been several stretches of time when international funds have outperformed domestic ones. In fact, many of them have much better one-year returns than the domestic equity funds. The only equity categories that have delivered positive returns have been Pharma and FMCG. The decline of the rupee’s value has helped, but that’s not all there is to it.
Yet, it is a mixed bag where international funds are concerned. Some have delivered positive one-year returns, while numerous fall into negative territory. Currently there are 29 schemes available across gold, commodities, real estate and agriculture. Below are four which take the labels of top performers and worst ones.
ING Global Real Estate Retail
“The performance of the fund can be attributed to the revival in real estate markets globally. We also had large exposure to US companies which helped us when the rupee depreciated from Rs 44 to Rs 50. With recovery seen in the US equity market and interest rates likely to come down in other countries, the infrastructure sector is likely to benefit going ahead.”
This was the first global real estate fund to be launched in India. Though available for four years, it has recently got noticed with its impressive returns. It now grabs the top spot, in terms of returns, in the ‘International Fund’ category. In the past year it has delivered 14.64 per cent, which is way ahead from a lot of its peers.
The underlying fund - ING Global Real Estate Securities Fund, invests in stocks of companies which include real estate, industrial properties, malls and others in countries across the globe.
Principal Global Opportunities Fund
“This fund is for investors who want diversification in their portfolio. As we all know last year was bad for the Indian market, so investing in such a kind of fund will help investors create a value out of diversification.”
One of the first international funds to be launched way back in 2004, the scheme predominately invests in Principal Global Investors-Emerging Market Equity Fund. Its one-year returns of 6.86 per cent put it in a good light.
DSP BlackRock World Mining
“Mining equities in general have underperformed the underlying commodities in the last one year. This was mainly driven by a ‘risk-off’ sentiment amongst investorsacross the world, due to the overhang of the Eurozone debt crisis and fears of slowing economic growth. Downgrade of US debt rating was also a contributor to this trend.”
Launched late 2009 when commodities across the globe were on a run, this fund has failed to impress. Its one-year return of -11.10 per cent reflects the volatility of such stocks. But there is no denying the inherent demand for such commodities over the globe, which will only rise over time.
The structural supply-demand mismatch in energy, coal, and precious and industrial metals presents a strong case for investment in the equities of commodity miners. Though the latter are direct beneficiaries of an increase in commodity prices, they also have other risks pertinent to a mining company.
Basically a feeder fund, it buys the units of BlackRock Global Funds -World Mining Fund and is benchmarked against HSBC Global Mining Index.
Mirae Asset Global Commodity Stocks
“Slowdown in China and high interest rates in emerging markets had some impact on the performance in the last one year. With valuations of many commodity companies turning attractive in the last few months, it might help the scheme going forward.”
When launched in July 2008, it was the first commodity-based scheme in India. Till date it has delivered a return of 5.11 per cent, though its one-year returns are -8.24 per cent. Agrawal believes that recovery is expected in emerging markets which will impact this portfolio which invests in stocks of the Asia Pacific region and in emerging markets. He is staying as diversified as possible by investing in Coal, Cements and Agri-businesses.
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