International Mutual Funds

An international mutual fund invests in firms in countries other than the ones they
reside. It is also called overseas or foreign funds. Investing in them may mean more
risk exposure, but also chances of higher returns. People usually prefer it as an
alternative and/or long-term investment.
With people getting increasingly aware of investment options around the world, the
need for portfolio diversification is greater than ever. A diverse plan not only spread
the risks, but also tap earning potential of different markets. The fund houses are
coming up with innovative schemes across market types, sectors and risk classes, with
more experimental investors entering the playground.

Features of International Funds

International funds offer a great opportunity to diversify and earn returns by
being a part of the growth story of companies around the world. Like any other
type of investment, investing abroad has its own set of risks and benefits as well.
Understand them well to be able to invest judiciously.

a. Risk Factor
Currency exchange rates go through highs and lows all the time. For instance, in a
US-centric international fund if the rupee falls against the dollar, then you get more
rupees per dollar invested – the NAV shoots up. On the other hand, if the rupee rises,
then you get lesser rupees per dollar and the NAV falls.

b. Requires Constant Vigilance

Political, social and economic aspects in different countries can impact mutual fund
performances differently. So, the investor requires exceptional interest in investments
to keep track of the market movement regularly.

c. Scope for better Market Returns

By capitalizing on multiple economies simultaneously, your portfolio can fetch higher
returns. Aside from mitigating risks by diversifying, overseas investing also boosts
your portfolio quality.
d. Dual Market Risk
The other country’s current market fluctuation and the sectorial market (real estate, IT
etc.) can impact the fund performance. Hence, it needs a lot of research and
contemplation to make an informed choice.

e. Tax-Efficiency
There is also the issue of taxation that could prove to be a potential minefield. For
instance, hybrid global funds invest 65%-70% of their corpus in domestic companies
and the remaining in overseas markets. Therefore, it makes the returns subject to long
term capital gains tax.

Advantages of Foreign funds

a. Geographic Diversification
One country can never top the charts consistently – so even if you don’t have a chance
this year, there is one, the next year. At a macroeconomic level, most countries have
their own economic cycle. Hence, by investing in different countries, you can
experience smaller crests and troughs in your returns.

b. Can contribute to a Cost-Effective Portfolio

You can utilize this exposure to foreign money to meet bigger financial goals (like
your child’s wedding or college education). When it comes to overall value, Indian
equities do not come cheap. Market experts say we might have already hit the market
high. So, a wisely-picked International Fund can balance this out.

c. Portfolio Diversification
An investment portfolio has a combination of high, medium and low risk investments.
Hence, when there is a market low in the home country, the one abroad can
compensate for it.

d. International Exposure under Expert Management

You may not have the adequate knowledge about the foreign country’s economy and the industry
there. Here, a qualified intermediary can assist. Therefore, you can gain exposure to global
market even if you are not familiar with it.
Returns of Indian Overseas Mutual Funds Schemes with that of Other Major
Global Markets India
India USA China

Best Performing Annualized Best Performing Annualized Best Performing Annualized

Overseas Return- One Equity (Large Return- One Equity Mutual Return- One Year
(Equity) Mutual Year Blend) Mutual Year Funds
Funds Funds
Tata Growing 49.6% Golden Large 12% Neuberger 16.24%
Economies Cap Core Fund Berman Greater
Infrastructure China Equity
Fund – Direct
Tata Indo Global 48.6 Wells Fargo 11.50% Matthews China 13.96%

Infrastructure Fund Advantage Large Cap Core Dividend Investor

Mirae India 25.8% Large Cap 10.03% AllianzGI 6.83%

China Core Fund JP China Equity
Consumption Morgan Tax
Fund - Direct Aware Equity
Fund
RS China Y 6.40%
Franklin 23.6% Glenmede 9.69%
Feeder – US Large Cap
Opportunities Core Portfolio
Fund – Direct
Plan
Motilal MOST 22.2% Prime Cap 9.31% Columbia 5.84%
Shares Odyssey Stock Greater China
NASDAQ 100 Funs D I
ETF
ICICI 20% Vanguard 9.06% Invesco 5.34%
Prudential Structured Greater China
Equity Savings Large Cap R5
Fund – Series Equity Fund
1 – Direct Plan
ICICI 19.2 Wilmington 8.61% Clough China 3.89%
Prudential Large-cap I
Indo Asia Strategy Fund
Equity Direct
Plan
L&T Indo 18.6 Columbia 8.50% Matthews 3.60%
Asia Equity Large Cap China Small
Fund- Retail Enhanced Core Companies
Plan Fund
Birla Sun life 13.7 Vanguard 8.05% Fidelity 3.55%
International Growth and Advisor China
Equity fund – Income Fund Regio I
Plan B - Direct
Kotak US 12.2 SEI 7.49% Voya Hang 2.61
Equity Fund - Institutional Seng Index
Direct Investment Part I
Large Cap
Returns of Mutual Fund Schemes investing abroad with that of
Similar Mutual Fund Schemes holding Equity Portfolio in India

Large Cap Equity Mutual Funds - India Overseas Mutual Funds - India
Scheme Annualized Return Scheme Annualized Return
Three Year Three Year
Escorts Leading 33.6 ICICI Prudential 25.6
Sectors – Direct Indo Asia Equity
Fund - RP
Escorts Growth 27.8 Motilal Oswal Most 25.5
Plan Shares NASDAQ
100 ETF
SBI Blue Chip 27.2 Franklin India 25.2
Fund Feeder – US
Opportunities Fund
Franklin India 26.6 Mirae India China 25.2
Opportunities Fund Consumption Fund
JM Multi Strategy 25.8 ICICI Prudential 21.4
Fund US Blue-chip
Equity
Birla Sun Life Top 25.7 DSP Blackrock US 19.6
100 Flexible Equity
Fund
Birla Sun life 25.6 L&T Indo Asia 19.3
Frontline Equity Fund
Kotak 25.1 JP Morgan Greater 19.0
Opportunities Fund China Equity
Reliance Focused 24.7 Birla Sun Life 16.5
Large Cap Fund – International Equity
Retail Plan
IDBI Top 100 24.3 Tata Growing 16.4
Equity Economies
Infrastructure Fund