- Date : 15/11/2021
- Read: 5 mins
Want to become an international investor? Read this article for all you need to know about investing in international equity mutual funds.
Are you looking for ways to diversify your investment portfolio? These days, there are several opportunities for investors. Spreading investments across assets allows one to minimise risk and earn good returns. Many investors wish to diversify their portfolios geographically without being restricted by the boundary of a country. And so, internationally investing is gaining more popularity.
If you too want to become an international investor, international equity mutual funds are definitely an opportunity worth checking out. This article will provide all the necessary information about international equity mutual funds.
Let’s dive in!
What are international equity mutual funds?
Simply put, international mutual funds invest in companies across the globe. Consequently, they are often referred to as overseas funds or foreign mutual funds. With technological innovations blurring the lines between countries, many investors have taken the opportunity to tap into international markets and earn revenues.
International funds mostly invest in equity, debt securities, and other equity-related instruments listed outside India. These funds are often part of FoF (fund of fund) schemes, whose underlying funds invest in foreign markets.
Why consider international mutual funds?
As an Indian investor, here are a few reasons you should consider investing in international mutual funds:
- Access to high growth companies listed in other countries
- Reduces risk from significant domestic events
- International market exposure enables diversification of portfolio
- Provides a guard against the depreciation of the Indian currency
- Allows one to tap into international markets through qualified managers
What are different types of international mutual funds?
International mutual funds can be broadly divided into four categories.
- Global funds: Many people confuse global funds with international mutual funds since the terms are often interchangeable, but they are not the same. Global funds invest all over the world, including the country the investor resides in. However, international funds do not invest in securities in the investor’s home country.
- Regional funds: Regional funds focus their investments on a specific geographical region, which could be anywhere in the world.
- Country funds: Country funds invest their resources in securities exclusively from one foreign country. While it requires extensive research, it also allows investors to leverage a specified country’s economy.
- Sectoral funds: Sectoral funds or global sector funds focus on a specific sector across multiple countries. These funds aim to invest in securities of only one sector to gain exposure.
Now, let us look at a few cases of international mutual funds and their performances in different time periods.
Performance of global international mutual funds
One of India’s most prominent global international mutual funds is Aditya Birla Sun Life International Equity Fund - Plan A. It invests in stocks globally, capitalising on the strengths of individual countries. The fund uses its experience of over a decade in global equity research to invest in well-performing stocks without any market capitalisation.
It has provided the following rate of return over the last few years:
- One year: 38.83%
- Three years: 16.48%
- Five years: 13.40%
Related: Diversify Your Equity Portfolio By Investing In Stocks Overseas
Performance of regional international mutual funds
Edelweiss Greater China Equities Off-shore Fund is a notable example of a regional international mutual fund. It is a fund of fund scheme that invests in the Greater China Fund of JP Morgan Fund. The fund focuses on companies that carry out business activities in Taiwan, China, and Hong Kong, collectively referred to as the Greater China Region.
Its returns have been as follows:
- One year: 63.34%
- Three years: 26.89%
- Five years: 25.35%
Performance of country-specific international mutual funds
Nippon India US Equity Opportunities Fund is a popular country-specific international mutual fund available to Indian investors. It invests primarily in high-quality and high-growth securities listed in recognised US stock exchanges. The fund follows the ‘hare’ investing strategy and invests in companies that grow rapidly with a sustainable competitive edge.
Here are its rates of return at different points in the last few years:
- One year: 47.98%
- Three years: 24.23%
- Five years: 19.79%
Performance of sectoral international mutual funds
One of the best performing sectoral international mutual funds in India is L&T Infrastructure Fund. It aims at earning profits by investing primarily in equity and equity-related instruments of companies exclusively in the infrastructure sector. The fund was launched in 2007 and has grown manifold since then.
Here are its rates of return over the last few years:
- One year: 81.3%
- Three years: 13.6%
- Five years: 13.9%
Acceptance by Indian investors
Over the years, Indian investors have warmed to international mutual funds. They have realised that stock indices in different countries can behave differently at different times, so investments should not be limited because of geographical boundaries. Investing internationally allows users to diversify their investment portfolios and benefit from the taxation angle as well.
Related: Consider These Factors Before You Redeem Your Mutual Funds
Last words
Today, there is no need for investors to be bound by political boundaries. You can invest in any country, region, or sector you deem feasible. In India, there are now many funds that let users invest internationally via the scheme. However, care must be exercised, as with great rewards come great risks. Fluctuation in currency exchange value and political factors are two of the most prominent risks while investing in international mutual funds.
If you too would like to become an international investor, look for a fund that aligns with your goals and get investing!
Are you looking for ways to diversify your investment portfolio? These days, there are several opportunities for investors. Spreading investments across assets allows one to minimise risk and earn good returns. Many investors wish to diversify their portfolios geographically without being restricted by the boundary of a country. And so, internationally investing is gaining more popularity.
If you too want to become an international investor, international equity mutual funds are definitely an opportunity worth checking out. This article will provide all the necessary information about international equity mutual funds.
Let’s dive in!
What are international equity mutual funds?
Simply put, international mutual funds invest in companies across the globe. Consequently, they are often referred to as overseas funds or foreign mutual funds. With technological innovations blurring the lines between countries, many investors have taken the opportunity to tap into international markets and earn revenues.
International funds mostly invest in equity, debt securities, and other equity-related instruments listed outside India. These funds are often part of FoF (fund of fund) schemes, whose underlying funds invest in foreign markets.
Why consider international mutual funds?
As an Indian investor, here are a few reasons you should consider investing in international mutual funds:
- Access to high growth companies listed in other countries
- Reduces risk from significant domestic events
- International market exposure enables diversification of portfolio
- Provides a guard against the depreciation of the Indian currency
- Allows one to tap into international markets through qualified managers
What are different types of international mutual funds?
International mutual funds can be broadly divided into four categories.
- Global funds: Many people confuse global funds with international mutual funds since the terms are often interchangeable, but they are not the same. Global funds invest all over the world, including the country the investor resides in. However, international funds do not invest in securities in the investor’s home country.
- Regional funds: Regional funds focus their investments on a specific geographical region, which could be anywhere in the world.
- Country funds: Country funds invest their resources in securities exclusively from one foreign country. While it requires extensive research, it also allows investors to leverage a specified country’s economy.
- Sectoral funds: Sectoral funds or global sector funds focus on a specific sector across multiple countries. These funds aim to invest in securities of only one sector to gain exposure.
Now, let us look at a few cases of international mutual funds and their performances in different time periods.
Performance of global international mutual funds
One of India’s most prominent global international mutual funds is Aditya Birla Sun Life International Equity Fund - Plan A. It invests in stocks globally, capitalising on the strengths of individual countries. The fund uses its experience of over a decade in global equity research to invest in well-performing stocks without any market capitalisation.
It has provided the following rate of return over the last few years:
- One year: 38.83%
- Three years: 16.48%
- Five years: 13.40%
Related: Diversify Your Equity Portfolio By Investing In Stocks Overseas
Performance of regional international mutual funds
Edelweiss Greater China Equities Off-shore Fund is a notable example of a regional international mutual fund. It is a fund of fund scheme that invests in the Greater China Fund of JP Morgan Fund. The fund focuses on companies that carry out business activities in Taiwan, China, and Hong Kong, collectively referred to as the Greater China Region.
Its returns have been as follows:
- One year: 63.34%
- Three years: 26.89%
- Five years: 25.35%
Performance of country-specific international mutual funds
Nippon India US Equity Opportunities Fund is a popular country-specific international mutual fund available to Indian investors. It invests primarily in high-quality and high-growth securities listed in recognised US stock exchanges. The fund follows the ‘hare’ investing strategy and invests in companies that grow rapidly with a sustainable competitive edge.
Here are its rates of return at different points in the last few years:
- One year: 47.98%
- Three years: 24.23%
- Five years: 19.79%
Performance of sectoral international mutual funds
One of the best performing sectoral international mutual funds in India is L&T Infrastructure Fund. It aims at earning profits by investing primarily in equity and equity-related instruments of companies exclusively in the infrastructure sector. The fund was launched in 2007 and has grown manifold since then.
Here are its rates of return over the last few years:
- One year: 81.3%
- Three years: 13.6%
- Five years: 13.9%
Acceptance by Indian investors
Over the years, Indian investors have warmed to international mutual funds. They have realised that stock indices in different countries can behave differently at different times, so investments should not be limited because of geographical boundaries. Investing internationally allows users to diversify their investment portfolios and benefit from the taxation angle as well.
Related: Consider These Factors Before You Redeem Your Mutual Funds
Last words
Today, there is no need for investors to be bound by political boundaries. You can invest in any country, region, or sector you deem feasible. In India, there are now many funds that let users invest internationally via the scheme. However, care must be exercised, as with great rewards come great risks. Fluctuation in currency exchange value and political factors are two of the most prominent risks while investing in international mutual funds.
If you too would like to become an international investor, look for a fund that aligns with your goals and get investing!
