DSP BlackRock brings its foreign funds to India

Apart from gold funds, foreign funds—especially those that invest in Brazil—seem to have become the flavour of the season

DSP BlackRock Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch three global funds—DSP BlackRock Latin American Fund, DSP BlackRock World Agriculture Fund and DSP BlackRock New Energy Fund. All three are open-ended fund of funds (FoF) schemes investing in international BlackRock funds.

Global funds offer diversification benefits, by investing in stocks (bio-tech, technology, energy, agriculture and mining etc.) which an Indian investor may not be able to buy by just investing in domestic schemes. However, funds that put your money in other countries don’t necessarily offer another round of diversification. In fact, markets in countries around the world have been moving in sync. In April 2009-March 2010 the Sensex was up 77% while the MSCI Emerging Markets Index was up 74%. Non-correlated market movement is not easy to find. This is because an enormous pool of global capital is sloshing around the world looking for a slightly higher return. As with other kinds of products, foreign funds are not about returns alone. There are risks too. You are exposed to all kinds of risks unique to different countries, plagued with their own set of issues.

In 2007, as many as eight funds were launched that planned to invest overseas. These eight funds, on an average, have given returns as low as 0.1%. These include ICICI Prudential Indo Asia Equity Fund-Ret with 2.6% return; Birla Sun Life International Equity Fund-Plan A (-0.7% return); Birla Sun Life International Equity Fund-Plan B (-1.6% return); Kotak Global Emerging Market Fund (0.4% return), Fidelity International Opportunities Fund (8.7% return); Tata Indo-Global Infrastructure Fund (-7.5% return) and BNP Paribas China-India fund with -3.4% return.

DSP BlackRock Latin American Fund plans to invest in units of BlackRock Global Funds Latin American Fund (BGF-LAF). It has given a return of 14.61% over the last 5 years and 15.27% since inception (3 January 1995). This fund is in turn benchmarked to an index known as DAX Global Agribusiness which has given a return of 13.37% in the last 5 years and 13.31% since inception while the Sensex and Nifty have returned 11% (CAGR, Compounded Annual Growth Rate) over the past 5 years. And the Sensex and Nifty have returned 10% (CAGR) since January 1995.

DSP BlackRock World Agriculture Fund plans to invest in units of BlackRock Global Funds World Agriculture Fund (BGF WAF). It has given a return of 20.29% since inception. This fund is benchmarked to an index known as DAX Global Agribusiness, which has given a return of 21.14% since inception.

DSP BlackRock New Energy Fund plans to invest in units of BlackRock Global Funds New Energy Fund (BGF-NEF). It has given a return of -4.32% in last 5 years and -5.76% since inception. This fund is benchmarked to an index known as MSCI World Net Index which has given a return of -0.03% over the last 5 years and 3.75% since inception. As you can see, the performance of BlackRock New Energy Fund is not very exciting, to say the least.

Another issue is that it is hard to find the details of where exactly your money is being invested. Even Moneylife could not find sufficient data to analyse these international funds. We could only get the details of BlackRock Latin America fund. The top five holdings of BlackRock Latin America Inv A are Vale S.A. ADR, Petroleo Brasileiro SA Petrobras ADR, Itau Unibanco Holding SA ADR, Bank Bradesco ADR (all from Brazil) and America Movil S.A.B. de C.V. ADR L of Mexico.

Source: http://www.moneylife.in/article/dsp-blackrock-brings-its-foreign-funds-to-india/16136.html