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US-focused mutual funds corner most of the flows into international schemes

Advisors say investors must go for time-tested markets and geographies, rather than going for niche markets or themes

August 13, 2021 / 04:07 PM IST

The number of folios in global funds has risen to 9.80 lakh as of July 2021, up from 5.22 lakh in December 2020, as per Association of Mutual Funds of India (AMFI) figures. Data from Morningstar indicates that schemes or fund of funds that invest in the US markets got the maximum flows in the first six months of 2021.

Destinations that investors prefer

Fund of funds that invest in US-based schemes or exchange-traded funds got net inflows of around Rs 5,174 crore. Though fund houses do not disclose flows, Morningstar makes estimates on a quarterly basis. Out of 50 mutual fund schemes that invest abroad, 12 invest in the US markets, 10 invest in markets across the world and six others, too, invest across the world but in various themes, such as consumer spending, companies focused on innovation and climate change.

Thematic global funds have also been popular. As per Morningstar estimates, inflows worth roughly Rs 2,713 crore came in funds these funds. And another Rs 676 crore came into funds that invest broadly in global markets, across various themes, sectors and companies.

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Five funds invest across emerging markets, excluding those invest specifically in and around China, just Asia and even Japan. Three funds invest in the European region.

Evolved investor interest

Radhika Gupta, Managing director and chief executive officer of Edelweiss Mutual Fund says that investor interest in global funds have gone up dramatically in the last two-odd years. She cites the example of Edelweiss US Technology Equity FoF, which the fund house had launched in March 2020 and got inflows of around Rs 92 crore. But spurred by good returns, the fund has got net inflows of around Rs 117 crore, on an average, every month so far this year, as per Morningstar estimates.

To be sure, some of the schemes that received large inflows so far this year got the money largely in during new fund launch periods. For instance, HSBC Global Equity Climate Change FOF got inflows of about Rs 621 crore in March 2021. But its inflows in subsequent months fell sharply; just about Rs 10.49 crore in May and just Rs 7.67 lakh in June. Similarly, Axis Global Innovation FOF got roughly Rs 1625 crore in May as per Morningstar estimates, in its launch. In June, its net inflows were Rs 36.56 crore.

Choosing among US, Global and Chinese markets

Many distributors and financial advisors suggest that investors must invest in markets or themes that they understand. Deepak Chhabria, CEO and Director, Axiom Financial Services prefers to invest largely in the US markets, “because they are time-tested, evolved markets and better understood.”

Chhabria says that geographical diversification is necessary because it gives investors a chance to participate in stocks and in industries or sectors that you don’t in Indian markets. He says that while many young investors have chosen to open brokerage accounts and buy shares of international companies directly, older and established investors prefer to go via mutual funds.
Kayezad E Adajania heads the personal finance bureau at Moneycontrol. He has been covering mutual funds and personal finance for the past two decades, having worked in Mint and Outlook Money magazine. Kayezad was the founding member of Mint’s personal finance team when it was set up in 2009.
first published: Aug 13, 2021 09:37 am

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