Despite severe losses and rapid shrinkage to net assets of existing schemes, mutual fund houses are hoping to get investors to their newly-launched international funds that invest in overseas equity and debt. Holding on to the old ‘risk diversifier’ theory, fund houses are launching more overseas investment schemes, with many acting as feeder funds that will increase the asset base of the main fund.
Undeterred by low performance, fund houses like DSP Blackrock, ICICI Pru, IDFC, Mirae Asset, Reliance and JPMorgan are launching newer schemes that are mandated to invest in stocks of foreign companies. While DSP Blackrock has received approvals for launching two feeder funds (World Mining Fund and World Energy Fund), JPMorgan is currently in the NFO phase to raise money for its Greater China Equity Off-shore Fund.
“Feeder funds are usually launched to replenish or expand the asset base of a principal fund. While it will be difficult for fund marketers to collect large sums of money from one market, they launch feeder funds in different markets and pool in the required money,” said the channel head of a bank-promoted fund house.
IDFC and ICICI Pru MF have approached Sebi for approvals to launch a World Gold Fund and Global Basics Fund, respectively, while Mirae Asset and Reliance MF have sought approvals for a China Advantage Fund and International Equity Fund.
“We’re just keeping approvals (to launch an international equity fund) in place so that whenever there is investors’ appetite, the fund can be launched,” said Reliance MF CEO Sundeep Sikka, adding, “this product caters to a defined set of investors. It enables investors to have portfolio allocation on the basis of regions. Mutual fund is a long-term game, and down the line, people will look for diversification into other markets,” he added.
While the diversification theory sounds good to ears, it has not done well to investors who had invested into international funds previously. While net asset values (NAVs) of most funds in this category fell around 50% from their peak levels, assets under management of a few schemes shrunk 60-70% as a result of the market meltdown.
According to online MF tracker Valueresearch.com, Birla Sun Life International Equity; DWS Global Thematic; HSBC Emerging Equity; ING Global Real Estate; Principal Global Opportunities and Sundaram BNP Paribas Global Advantage are logging negative returns in the range of 20-27%. Only Franklin Asia Equity scheme is in the positive zone with annual returns over 1%.
“It’ll be unfair to assess international funds against the backdrop of the current economic downturn. All markets have been impacted by it. In a normal case, different markets perform differently; they have their own time of growth and degrowth. That is when international funds yield good results,” Mr Sikka added.
Undeterred by low performance, fund houses like DSP Blackrock, ICICI Pru, IDFC, Mirae Asset, Reliance and JPMorgan are launching newer schemes that are mandated to invest in stocks of foreign companies. While DSP Blackrock has received approvals for launching two feeder funds (World Mining Fund and World Energy Fund), JPMorgan is currently in the NFO phase to raise money for its Greater China Equity Off-shore Fund.
“Feeder funds are usually launched to replenish or expand the asset base of a principal fund. While it will be difficult for fund marketers to collect large sums of money from one market, they launch feeder funds in different markets and pool in the required money,” said the channel head of a bank-promoted fund house.
IDFC and ICICI Pru MF have approached Sebi for approvals to launch a World Gold Fund and Global Basics Fund, respectively, while Mirae Asset and Reliance MF have sought approvals for a China Advantage Fund and International Equity Fund.
“We’re just keeping approvals (to launch an international equity fund) in place so that whenever there is investors’ appetite, the fund can be launched,” said Reliance MF CEO Sundeep Sikka, adding, “this product caters to a defined set of investors. It enables investors to have portfolio allocation on the basis of regions. Mutual fund is a long-term game, and down the line, people will look for diversification into other markets,” he added.
While the diversification theory sounds good to ears, it has not done well to investors who had invested into international funds previously. While net asset values (NAVs) of most funds in this category fell around 50% from their peak levels, assets under management of a few schemes shrunk 60-70% as a result of the market meltdown.
According to online MF tracker Valueresearch.com, Birla Sun Life International Equity; DWS Global Thematic; HSBC Emerging Equity; ING Global Real Estate; Principal Global Opportunities and Sundaram BNP Paribas Global Advantage are logging negative returns in the range of 20-27%. Only Franklin Asia Equity scheme is in the positive zone with annual returns over 1%.
“It’ll be unfair to assess international funds against the backdrop of the current economic downturn. All markets have been impacted by it. In a normal case, different markets perform differently; they have their own time of growth and degrowth. That is when international funds yield good results,” Mr Sikka added.
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