Ask Me Anything about Investing in International Mutual Funds

#1

Mr. Rajesh Iyer is the Chief Executive Officer for DHFL Pramerica Asset Managers Pvt. Ltd.

An industry veteran in the BFSI sector, with over two decades of experience in the capital markets industry, Rajesh previously was Senior Executive Director and Head – Investment Advisory Services & Family Office at Kotak Wealth Management. His expertise includes equity research, proprietary fund management for bank treasuries and investment advisory.

Prior to Kotak Wealth Management, Rajesh was associated with brands such as UTI-Nomura Securities in India and TAIB Bank EC, National Bank of Bahrain in Bahrain. He is a qualified Chartered Accountant (ICAI) and Cost Accountant (ICWAI) from India. He is also a qualified Chartered Financial Analyst (CFA) and Financial Risk Management (FRM) professional from the United States.

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#4

Even if i invest in the highest earning international mutual funds, How currency exchange rate will afftect my earnings?

#5

Hi Rajesh, thanks for doing this. Enjoyed your previous webinar on debt funds. I have a few questions would love to hear your thoughts

  1. Since almost all the global mutual funds in India are FOFs, I am essential taking a bet on two funds and two fund managers. Would you advise an average investor to look at some of these funds?
  2. Should investors ideally have global exposure in their portfolio?
  3. Should investors also factor in currency movements when investing in these funds?
  4. I see that DHFL has a couple of these in it’s stable, how are the inflows in these funds? Can you also comment on the larger trends in terms how these FOFs have performed?
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#8

Hi Smit,
Rupee depreciation against the dollar will work in your favour as an investor into an international fund. It adds to the returns. If rupee appreciates it will take away some part of returns. However over the years we have seen Rupee steadily depreciate against USD and the investment working well for Indian investors as long as it is dollar denominated underlying investment and the asset class doing well.

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#9

Thank you Rahul. The Indian funds are feeder funds into offshore funds. There is a single fund manager that is person managing the offshore fund and hence you are not taking a call on two fund managers. Average investors should look at global funds from the point of view of diversification and participating in themes that are not available in the Indian markets. Over medium to long term the performance of the underlying assets is much more important than the currency movement. US centric funds have done better than the other themes. International funds are slowly catching the attention of domestic investors and will probably see the strong flows in times to come.

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#10

Hi Rajesh, thanks for the AMA. I get the feeling that for almost all of the Indian AMCs, these fund of funds are more symbolic offerings, just like ETFs. Does the size of the current market and the lack awareness the reason for this or is there something much more structural at play?

#11

Hi Abhsishek, like any other country Indian investors have a strong home bias. Clearly the benefit of long term taxation on Indian equities being zero before this budget worked in favour of domestic funds as against most of international offerings that are classified as debt. However with introduction of LTCG on equities after 1st April, the taxation gap has narrowed and interest is building up on select opportunities on the international side

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#12

Hi sir, can you suggest me some good international mutual funds.

#13

Sudden depreciation in rupee, will work in my favour. Does that mean in long term if rupee depreciates i can earn more profit against indian equity funds and markets?

#14

Hi Vicky we have some interesting options on our platform but would request you to consult your financial advisor to help you identify the right product.

#15

Your returns from investing in the international funds will be made up of two components, performance of the underlying assets and behavior of rupee against the currency in which assets are held. So outperformance/ underperfomance will depend upon the performance of theme and the currency. However international funds should be used for diversification and participating in unique themes that cannot be played through domestic equities.

#16

Hi Rajesh,

Thank you for the AMA.

I was curious to know if fund managers of international mutual funds invested in Index ETFs as well.

Also, if someone from India wanted a piece of action in the global Indices (S&P 500) for example, are International mutual funds a good option. Are there any other alternatives?

#17

International mutual funds can technically invest in Index ETFs. Mutual funds are a good option as the other alternative of going through LRS route can be cumbersome

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#18

Thanks Rajesh, i am sure this question is eventually gonna be asked but I am preempting it. What are some pointers you would give me, if I were to invest in these global funds. Thanks

#19

Hi Rahul, Key here would be to look for the attributes of the underlying fund like consistency of the fund performance, level of risk, time period for which the fund manager has been managing the fund and most importantly the outlook on the asset that you intend to invest in.

#20

Hello Sir,

So with diversity in mind, I decided to invest in two international MFs. This was quiet some time ago.

Problem- I made both of the international MF investment with the same AMC & both the MF have the same fund manager. Since these are relatively recent (started 2 months ago), I can quit one and start again with different AMC, should I?

Both the MFs are in different countries.

Thanks.

#21

Hello Sir,

How is Motilal Oswal NASDAQ 100 ETF? Should I invest in it for the long-term period, say 4-5 Years. And What approximate percentage of CAGR I can expect from it.

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#22

Hello Sir,
Thanks a lot for taking time out to answer our questions.
My question is around the expense ratio when investing in Feeder funds. Is the expense ratio of feeder fund inclusive of the original fund into which feeder funds invest, or there’s a dual expense ratio (one of the feeder+one of the target fund into which this feeder fund invests)?

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#23

thanks for this, since technology stocks fang in us are doing well, is there a way to invest in them directly other than nasdaq etf? . Thank you, if so what is the procedure. Thank you

#24

Hi, the expense ratio of the feeder fund is inclusive of the underlying fund and subject to a maximum of 2.5% .

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