Data from the mutual fund industry showed that the number of folios in schemes that invest overseas has tripled to 4.40 lakh in October 2020, compared to 1.44 lakh a year ago. Assets under management in the same period rose to Rs 6,482 crore from Rs 2,470 crore.
Although this amount is a small part of the total equity mutual fund investments, financial planners point out there is a growing realization amongst investors to diversify their portfolios geographically.
Fund managers point out that there are differentiated opportunities - gaming, artificial intelligence, robotics, new energy and even companies making a Covid vaccine. Many of these are not available in India.
“Through these investments, investors are diversifying their equity portfolios and accessing world-class global companies,” says Radhika Gupta, CEO, Edelweiss Mutual Fund.
Schemes that have a diversified equity portfolio, with a bias for US-based equities and are leaders globally and some technology-oriented funds have garnered the bulk of the money.
Schemes like Franklin US Opportunities Fund, Axis Global Equity Alpha Fund of Fund, PGIM India Global Equity Opportunities Fund, Motilal Oswal S&P 500 Index Fund and ICICI Prudential US Bluechip Equity Fund have seen huge inflows from investors via both the lump sum and SIP routes.
Among thematic and country-specific funds, Edelweiss US technology fund of funds, Motilal Nasdaq 100 Fund, and Edelweiss Greater China Equity Offshore Fund have seen good inflows over the year. Some funds like Parag Parikh Long term Equity Fund, which have the option to hold up to 35% of their portfolio in global equities, have seen investor interest.
The math is in favour of investing overseas with the US accounting for 60% global market cap, China 7% and France 10% as compared to India’s 3%.
“There is increasing awareness among investors that if you have a home bias, you can miss out on growth opportunities. For many, an investment in these funds acts as a hedge against rupee depreciation and could be used to finance overseas holidays or children’s education,” says Vineet Nanda, Founder, Sift Capital.
However, financial planners advise going overboard on international equities. “Investors could have a 10-20% exposure to international equities in their portfolio,” says Rupesh Bhansali, Head (Distribution), GEPL Capital. Based on their risk appetite, he believes investors could choose 1-2 equity mutual funds among the available universe.