Subrahmanyam Guttina, a Bangalore-based software professional with a multinational firm, allocated a small portion of his money to a relatively-unknown US asset manager Superfund in the peak of the market downturn in 2008, based on the advice of his wealth manager. During the year, products of Superfund, which manages money through futures strategies in various assets, fetched 35-80% returns while values of equity market schemes of domestic mutual funds eroded 30-60%.
"Superfund provides a good diversification strategy and it has been performing consistently well. I've stayed invested for about two years in Superfund," Guttina said.
Two years later, wealth managers are again recommending products of asset managers, including Superfund, SPDRs, I-Shares and Maquarie Farmland to their rich clients as a hazy outlook for Indian stocks has heightened uncertainty about returns from domestic equity-linked products. Investors hope to generate "inflation-adjusted" returns through these investments.
Funds like the precious metal based-SPDR funds, I-Share ETFs and theme-based funds by Maquarie, among several others, have collected in excess of Rs 500 crore over the past five months. Superfund has mobilised over Rs 200 crore from rich Indian investors since March this year, according to wealth managers.
"We have seen increased unsolicited interest from NRIs and super HNI families," said Aaron Smith , managing director, Superfund Financial. "Indian equities have been the centerpiece for most wealthy Indian investors portfolio. However, with markets correcting deep in 2008 and lacklustre performance of the Nifty over the past one year, sophisticated investors are looking at absolute return strategies that can deliver alpha regardless of the particular market cycle," Mr Smith said.
Investors are using RBI's liberalised remittances scheme (LRS) route to invest abroad. Under the LRS , an Indian resident can invest up to $200,000 in overseas assets in one financial year.
Specialised overseas funds differ a lot in terms of investment strategies when compared to 'international funds' (or feeder funds that invest into offshore funds). Most Indian international funds in India are long-only global equity funds, which perform when equity markets move up. Superfund Green Gold has returned 20.1% per annum since inception in 2005 and 44.2% in the past 12 months, Mr Smith said.
Global equity markets have underperformed Indian shares in recent years. But when Indian equities are in a downturn, international funds run by domestic mutual funds deliver much lower returns than specialised overseas funds.
"Overseas domiciled funds don't have any bearing on Indian asset classes. This, in a way, helps these funds generate non-correlated returns," said Anil Rego, CEO of Bangalore-based wealth management firm Right Horizons.
"Specialised overseas funds are designed to perform in times of a market downturn. Most funds adopt long-short strategies that enable funds to generate returns in times of deep correction," Mr Rego said.
According to wealth managers, funds like Superfund allow investors to hold their funds in different currency denominations - that is, US dollar, euro or gold, the prices of which are linked to London markets. Wealth managers are advising Indian investors to hold their Superfund units in gold to insulate the portfolio from currency risk.
"Overseas domiciled funds help clients invest in non-rupee assets. These funds are based on newer ideas... They have a different product mix and they follow trend strategies which generate higher portfolio returns," said Hrishikesh Parandekar , CEO, Karvy Private Wealth.
Apart from higher returns, overseas funds allow investors to have multi-asset, multi-geography exposures. Maquarie's Farmland Fund, which invests in farmlands of Brazil , China , Australia and New Zealand , is very popular among Indian high net worth investors.
Source: http://economictimes.indiatimes.com/personal-finance/savings-centre/savings-news/returns-hungry-hnis-flock-to-offshore-funds/articleshow/9118199.cms
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