Thanks to a bull run in the markets worldwide, international investing has become the talk of the town and as a result, there has been a flurry of international-fund launches over the last one year. Out of the 63 funds that this category hosts as of December 2021, around one-third were launched in 2021 alone. There is also a growing realisation among Indian investors that investing part of their corpus in international funds can help in better diversification. The rise in assets of international funds also speaks volumes about their growing popularity. The category AUM had grown more than four times in 2020 YoY and with a further rise of 177 per cent, it increased to Rs 44,132 crore as of November 2021 from Rs 15,914 crore in December 2020. Of course, one of the reasons for this sudden jump is the bull market but there have also been significant inflows in international funds in the last one-and-a-half years, after they had started outperforming diversified domestic equity funds such as flexi-caps since the pandemic-led crash. Why international equity? At Value Research, we view international equity as a supplementary allocation (20-30 per cent) to an investor's core equity investments. Being a developing country, India is likely to deliver better equity returns vis-à-vis developed nations. So, the main objective of diversifying overseas should be to protect your portfolio from going completely haywire from a sharp correction in the Indian markets. Ways to go overseas These days there are all sorts of means available to take exposure in global markets apart from putting money in international mutual funds. One can open an overseas trading account with a domestic or a foreign broker or take help of various new-age mobile apps that have been launched to directly buy foreign stocks. However, it can be costly because of brokerage and currency conversion charges that come into the picture. So, one needs to compare the fees and charges of all such platforms to be able to pick the best one. In fact, international investing is such a hot space now that National Stock Exchange and Bombay Stock Exchange have proposed to provide an international trading platform for the Indian investors to invest in the international stocks in a more convenient and cost-effective manner. Interestingly, many domestic diversified equity funds have also started taking exposure in international stocks of up to 35 per cent, bringing the diversification benefits in a single convenient package for the Indian investors. As they continue to invest at least 65 per cent in the stocks of domestic companies, they are treated as an equity fund for
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