Invt should diversify outside India: Principal PNB MF

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Rajat Jain, CIO, Principal PNB Mutual Fund, said the returns from Global Opprtunities Fund have been better than those investing in India. He told CNBC-TV18 that their Global Opportunities Fund is classified as a non-equity fund for the purposes of tax treatment which is similar to that of a debt fund.

 

He advised Indian investors to diversify outside India and choose between the emerging market space, BRIC fund or a commodity-oriented fund.

 

Excerpts from CNBC-TV18's exclusive interview with Rajat Jain:

 

Q: Have the returns from Global Opportunities Fund been better than opportunities in India for the past quarter? What has been your experience if you compare your own bouquet of funds?

A: In the last 3-6 months, our Global Opportunities Fund has done better than the Indian indices and Indian equity fund. So, the returns from offshore investing in the emerging markets have been better than those one would have got investing in India.

 

Q: With regards to tax treatment under current rules, only pure equity funds get a lower tax regime. All the others are classified as debt. How is it with the Global Opportunities Fund?

A: It is classified as a non-equity fund for the purposes of tax treatment. The tax treatment is similar to that of a debt fund.

 

Q: If one were to invest abroad right now, what space would you be looking at? Would it be Asia, ex-Japan more high growth, hi-beta value plays in Europe or a commodity play like a BRIC fund? Are those levels of customization available in mutual funds investing abroad?

A: If we just step back a bit, we find that there is a ceiling that the regulator prescribes for Indian mutual funds to invest abroad. We are still far away from getting anywhere close to that ceiling. So, the Indian investors have been very focused on investing in Indian equities space or the Indian fixed income space for that matter.

 

Indian investors need to diversify outside of India and then one can choose between emerging market space or a BRIC fund or a commodity-oriented fund. The fund that we have is a fund which invests in the emerging market space. There are about 27-28 different emerging markets that the fund invests in.

 

We could have gone with a developed market fund or a more geography-oriented fund. But we found that emerging market fund made sense for certain reasons including the rise of consuming class. In India, we have seen a rise in the consumer class and a similar story is playing out in countries like Russia, South Africa, Latin American countries and Eastern European countries.