Monday, April 13, 2009


(April 2009)

Gems – a rarity in reality!

With a volatile domestic market during the past one year, ensuing the arrest in the four year bull run, investors have been seeking greener pastures… Do the international mutual funds in India fit the bill?

I highlight the three GEMs in the following list of funds introduced in the April 2008 GEM GAZE .

Principal Global Opportunities Fund

Principal Global Opportunities Fund is a feeder fund with 99.3% invested in PGIF Emerging Markets Equity Fund and the rest in cash and cash equivalents. The fund manages over $ 6 billion in emerging market assets. The fund is a bottom up stock selector. As part of risk control, it takes controlled exposure to individual stocks, sectors and countries vis-à-vis the benchmark. So, despite the controlled sector and country calls, the coverage ratio of the fund is 35-40 %. It follows a stock specific strategy with no sector calls or country calls. The fund takes multiple small bets rather than a few big bets. The performance over the past one year has been dismal at -34.90% as against the category average of -31.46%. In the past one month, however, the returns have turned positive at 18.39% as against the category average of 17.49%. The size of the fund is Rs.159 crore as on 31 March, 2009. The expense ratio is .88% and the portfolio turnover ratio is 10%.

Templeton India Equity Income Fund Gem

With 95% of the portfolio in equity, the top three sectors, namely, finance, energy and metals constitute more than 40% of the portfolio. The one-year return has just been only -32.4% as against the category average return of -34.24%. The returns have been a positive 33.2% as against a category average of 24.3% in the last one month. It is worth mentioning that in the equity diversified category, the largest gainer in March 2009 was Templeton India Equity Income Fund with an impressive 14.18% as against the average gain of 7.04 for the category, in general. The size of the fund is Rs. 754 crores as on 31 March, 2009. The expense ratio is 2.19% and the portfolio turnover ratio is 15.08%.

Fidelity International Opportunities Fund Gem

The top three sectors of Fidelity International Opportunities Fund, finance, healthcare and services constitute nearly 50% of the portfolio, with equity constituting 98% of the portfolio. The one-year return has been -33.93% as against the category average of -34.24%. The one-month return has been an impressive 25.63% as against the category average of 24.3%. Fidelity International Opportunities Fund was awarded ICRA 5-star Gold award 2009 in the “Open-ended diversified equity– Aggressive”, indicating performance within the top 10% of the category. The entry load has been increased to 3% from 2.25% for investments below Rs. 5 crore with effect from 1 January, 2009. The size of the fund is Rs.548 crores. The expense ratio is 2.03% and the portfolio turnover ratio is 21%.

DWS Global Thematic Offshore Fund

DWS Global Thematic Offshore Fund is a feeder fund with 98.7% invested in DWS Strategic Global Themes Fund. Though the one month return has been 16.85% as against a negative return of -33.90% in the past one year, the performance has been below the category average during both the time periods. With a fund size of a mere Rs.57 crore, the expense ratio stands at 0.74%.

Sundaram BNP Paribas Global Advantage Fund Gem

Depicting a dazzling diversity, the fund has its holding spread over 11 foreign equity mutual funds. Though the fund has slightly underperformed its category average by a narrow margin in the past one year, in the last one month, it has not only entered the positive territory but has also beaten the category average by a wide margin - 20.26 % as against the category average of 17.49% . The size of the fund is Rs.135 crores as on 31, March 2009. The expense ratio is 0.75%. The entry load is 2.75% for investments below Rs. 2 crore and the exit load is 1.5% for redemption before a period of 12 months.

ICICI Prudential Indo Asia Equity Fund

Predominantly equity-oriented with 97% of the fund invested in equity, 33% is invested in one foreign equity mutual fund, IOF Asian Equity Fund. Nearly two-thirds of the fund is invested in the top three sectors, finance, energy and FMCG, with 44% accounted for by the finance sector alone. During the market meltdown, the fund has fared far better than its peers and category. Considering the fact that the fund was in the deployment phase when the market tanked in January 2008, the exceptional performance may not be indicative of future returns. The size of the fund is Rs.363 crore. The expense ratio and portfolio turnover are high at 2.32 % and 280% respectively.

Kotak Global Emerging Markets Fund

Kotak Global Emerging Markets Fund channels its assets to the T. Rowe Price Emerging Markets Fund. The size of the fund is Rs. 159 crore. There is zero entry and exit load on the fund.

ABN Amro China India Fund

Renamed Fortis China India Fund, the fund has an asset size of Rs. 82 crores, with 95% invested in equity. 58% of the funds is invested in the top three sectors – energy, finance and FMCG. The one year return was – 28.45% as opposed to the category average of -34.24%. But its one month return, though positive, has taken a beating since it lags its category average - 22.78 % as against 24.3%.

Franklin Templeton India Opportunities Fund
The fund has the tendency to take concentrated, stock-specific exposure, at times investing as much as 10 per cent of the portfolio in individual stocks. The fund may, therefore, be suitable for investors with a high-risk appetite looking for higher-than-average returns. The fund’s NAV has lost 55 per cent in the last one year and has largely tracked the returns of its benchmark - BSE 100 over the same timeframe. In July 2008, the fund witnessed a change in manager and over the next two months it added 31 stocks to its portfolio. The portfolio has expanded from a compact 32 to 58 stocks now. The fund moved from a concentrated portfolio to a more diversified portfolio, but prefers to take concentrated exposure to specific stocks. With change in strategy, the fund was able to contain the downside better than the benchmark over the past three months. However, it may be too early to tell if this investment strategy will click over the long run. The top-three preferred sectors over the past few months continued to be banks, petroleum and capital goods. The fund has added higher exposures to consumer non-durables and pharmaceuticals, making for a more defensive exposure.
The gloomy global scenario has deprived nearly two-thirds of the funds in the list of their GEM status. Nevertheless, the three GEMs that we have zeroed in can adorn the tattered portfolio of the investor and provide the much needed diversification when he is in dire straits.

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