Monday, April 14, 2008


Gem Gaze

Picking the pearls...

The world is our oyster - our investment universe! That is the message Indian mutual funds are trying to convey through the spate of “global” or “international” fund offers that hit the market following the new-found freedom since Budget 2007.

Principal Global Opportunities Fund

Principal Global Opportunities Fund, launched in March 2004, is the first fund in the industry that invests exclusively in overseas equities. Rather than investing directly in stocks, it has become a feeder fund whereby it invests all its assets in PGIF Emerging Markets Equity Fund, one of Principal's global offerings. PGIF Emerging Markets Equity was launched in February 1998 and has assets worth US $50 million. The fund invests across geographies - Latin America, Asia, Eastern Europe, the Middle East and Africa with exposure to 22 countries (including South Korea, Brazil, Russia, China and Taiwan) besides 5.1 percent allocation to India.

Templeton India Equity Income Fund

Launched in May 2006, Templeton Equity Income follows a value investing philosophy, focussing on stocks with a high dividend yield across Indian and overseas markets. The portfolio includes stocks from such countries as Korea and Taiwan to Turkey and Brazil. In India, focus on dividend yield invariably leads to a bias towards sectors such as oil or banking. However, its portfolio encompasses a wide range of sectors such as electronics (United Microelectronics Corporation, Taiwan), retailing (Edgars Consolidated Stores, South Africa) and construction.The fund has fared particularly well during the recent choppy phase in the market, gaining more than the index during the rallies and losing less than it, during the corrective phases.

Fidelity International Opportunities Fund
Launched in May 2007, Fidelity International Opportunities Fund, invests up to 35% of its corpus in foreign securities, with the balance in the Indian market. The Fund has a “go-anywhere” mandate, but focuses on the Asia Pacific region excluding Japan. Its performance is benchmarked against a special benchmark, created using the BSE 200 (for 65 per cent of the portfolio) and MSCI Asia Pacific ex-Japan (for the rest 35 per cent).

DWS Global Thematic Offshore Fund

DWS Global Thematic Offshore Fund, launched in July 2007, predominantly invests in the DWS Strategic Global Themes Fund domiciled in Singapore.The scheme identifies themes that are driven by long-term secular change - global agribusiness and the importance of talent and ingenuity being the current themes. Over the past three years, DWS Global Thematic returned 22% annualized, an average of eight percentage points per year better than the average global stock fund and good enough to rank in the top 10% of its category.

Sundaram BNP Paribas Global Advantage Fund

Launched in July 2007, this fund of fund spreads its investment universe to include emerging markets across Asia, Eastern Europe and Latin America. The fund invests 85 to 100% of its assets in mutual fund and exchange-traded funds listed on overseas stock exchange and up to 0 to 15% in domestic money market instruments. FundQuest, a specialist in multi-manager and multi-asset class products, takes views on asset classes, geographies and funds and chooses suitable best-in-class options for deploying the assets of Sundaram BNP Paribas Global Advantage. The fund has a tailor-made benchmark: 40% MSCI EM Asia + 15% MSCI EM Latin America + 15% MSCI EM Emerging Europe + 15% FTSE EPRA/NAREIT Global Property + 15% Goldman Sachs Commodity Index.

ICICI Prudential Indo Asia Equity Fund
Launched in August 2007, the Fund is a diversified equity scheme that invests 65 per cent or more directly into Indian equities, and up to 35 per cent in Asian Equity Fund (an open ended equity fund managed by Prudential Asset Management, Singapore) that invests in equity markets across the Asia-pacific region ex-Japan. Presently the Asian equity fund is invested 22.6 per cent in Korea, 21.2 per cent in Hong Kong, 19.9 per cent in Taiwan, 8.1 per cent in China, 5.9 per cent in Singapore, 5.7 per cent in Australia, 4.8 per cent in Thailand, 4.1 per cent in India and the rest in other Asian countries. The Asian equity fund has returned 41.13 per cent in last one year and 31.18 per cent annualised over the last three years. The fund offers an opportunity to buy into industries not otherwise available and to own global leaders like Samsung Electronics, one of the largest consumer electronics company in the world, Taiwan Semiconductor, largest semiconductor manufacturing company in the world and Industrial and Commercial Bank of China, the largest bank in the world. The benchmark for the scheme will be 65% S&P CNX Nifty and 35% MSCI AC Far East Free ex - Japan Index.

Kotak Global Emerging Market Fund

Funds focussed on Asia allow the advantage of complementing one’s portfolio with stocks of hardware exporters, consumer electronics makers, travel companies or online portals and other consumption plays, for which there are few listed options in India. Similarly, emerging market funds that invest in countries such as Brazil and Russia offer exposures to mining, precious metals, oil, natural resources and other commodity stocks that are not so plentiful in India. Launched in September 2007, the three-year close-ended Kotak Global Emerging Market that widens its investment universe to include emerging markets across Asia, Eastern Europe and Latin America has the best of both worlds. Luxembourg domiciled T.Rowe price SICAV- Global Emerging Markets Equity fund, in which the money is invested has consistent performance track record. The Fund is benchmarked against MSCI Emerging Market Index.

ABN AMRO China India Fund

Launched in October 2007, this open-ended scheme invests 65 to 75 per cent of its assets in Indian equities and 25 to 35 per cent of it assets in Chinese equities. China and India have different strengths. China's strength, for example, lies in low cost manufacturing and the domestic infrastructure needed to meet the demands of its huge population. India's strength, in contrast, lies in areas like pharmaceuticals and IT. This provides greater diversification within an investment portfolio. The benchmark constitutes 65 per cent of BSE 200 and 35 per cent of FTSE China index.

Franklin Templeton Investment Opportunities Fund

Franklin Templeton Investment Opportunities Fund, launched in December 2007, invests in Asia ex-Japan equities. An Asia ex-Japan fund, it naturally includes an exposure to Indian stocks - 10-15% of the portfolio, with the ability to go to 20% in “extreme” situations. It can invest fully in overseas equities and equity-linked instruments or upto 30% in domestic bonds and cash instruments. Franklin Templeton invests directly and not through a feeder-fund structure. Sukumar Rajah, the firm’s Mumbai-based CIO, is the principal portfolio manager and his team handles Southeast Asian stock selection and research. Franklin Templeton’s investment teams in Seoul and Shanghai are responsible for North Asian stocks.

Many (money) flavoured menu !

Unlike earlier themes, such as infrastructure or multi-cap or small-cap funds, that have tended to spur a host of “me-too” fund launches, offerings within the “international investing” theme are now quite differentiated. Good news for investors, who can be selective in choosing funds that suit their diversification needs and risk profile. With most of the funds having been launched in the last few months, it is premature to judge them at this juncture. Moreover, as each fund has a different proposition, it is best to compare each fund to its benchmark rather than with the category average.

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