Stellar performance of global funds
Indian investors who looked beyond domestic equity markets have been rewarded well over the past year. A clutch of international mutual funds and fund-of-funds (FoFs) have outperformed even the strongest Indian equity categories.
According to ACE Mutual Fund data, as of October 20, top 10 international funds delivered one-year returns between 33 percent and 72 percent, riding on themes such as technology, artificial intelligence, consumer spending, semiconductors and natural resources.
While the Nifty50 returned just 5.7 percent over the past year, global equities rallied strongly, led by technology and AI-linked businesses in the US and Asia.
S Naren of ICICI Prudential AMC said global valuations still offer pockets of opportunity.
Most foreign markets, especially emerging economies like Korea, Brazil, Taiwan and China, are trading at cheap valuations and have “severely underperformed India” over the past decade and a half.
“This valuation gap presents an interesting opportunity for long-term investors who can look beyond domestic equities,” he said during Moneycontrol’s The Wealth Podcast.
The Mirae Asset NYSE FANG+ ETF FoF emerged as the best performer, generating 71.78 percent in a year and 62.72 percent over three years. It was followed by Invesco Global Consumer Trends FoF (up 52.65 percent), which benefited from resilient global consumer brands and digital commerce leaders. Broader US-focused strategies also did well. The Mirae Asset S&P 500 Top 50 ETF FoF returned 49.91 percent, while the Motilal Oswal Nasdaq 100 FoF delivered 42.48 percent.
Diversification beyond technology also paid off. The DSP World Mining Overseas Equity FoF delivered 32.83 percent due to rising global commodity prices and renewed capital discipline among mining giants.
Story continues below Advertisement
According to Abhishek Tiwari, CEO of PGIM India AMC, international investing must be viewed strategically, not transactionally. “Global funds are relevant, especially if you look at areas like China, Korea, or Brazil. If you’re thinking about exposures in sectors or countries that are not represented here, you could look at those as an opportunity. The important thing is to see how you fit it into your overall portfolio rather than pick and choose standalone,” he said.
Risks: Currency, regulations and volatility
There are regulatory headwinds. The RBI’s $7-billion overseas investment limit continues to restrict fresh inflows into several popular international funds that have already reached their caps.
Many global funds are closed for fresh subscription. However, in the case of ETFs, while fund houses are not creating new fund units, investors can directly trade in them via exchanges. One needs to check whether funds are available for fresh investments.
Despite the attractive returns, international investing carries risks. Currency fluctuations can work both ways while rupee depreciation enhances returns, an appreciation phase can erode gains. Given this, experts advise using international exposure as a diversification tool rather than a return chasing strategy.
How much should you allocate?
Advisers recommend a 10-15 percent portfolio allocation to international funds. Thematic strategies can be added for higher risk exposure but only as satellite holdings. Broader index-based funds such as S&P 500 or Nasdaq 100 provide more stable long-term exposure.
“Having 5-10 percent of one’s portfolio in global equities offers valuable geographic diversification, especially with the rupee’s long-term depreciation trend. For those seeking international exposure, select domestic funds such as Parag Parikh Flexi Cap and DSP Multi Asset Allocation offer indirect access to global markets and can serve as effective vehicles within a diversified portfolio,” Rajul Kothari of Capital League said.
International funds are no longer just an exotic add-on. They offer a seat at the global growth table. The opportunity is real but so is the need for discipline, asset allocation strategy and SIP-based investing.