Today, numerous investors seek to geographically diversify their investment portfolios. These investors invest in Global funds! Global funds are a kind of mutual fund that invests internationally outside of India, including in the United States. These funds predominantly invest in globally distributed companies. As its name suggests, the fund takes a worldwide perspective. It strives to diversify holdings in various regions of the globe. This fund’s inclusion of investments within the investor’s home country is the only requirement. Global funds have provided Indian investors with access to worldwide asset markets and promoted diversification.
What are Global Funds?
Global Mutual funds, usually referred to as overseas funds, invest in stocks of companies listed on international markets. By investing in international mutual funds, investors are exposed to more risk, but they also have the opportunity for a higher return. With the progression of time and the expansion of investor knowledge, investors are now more knowledgeable about the many investment opportunities available across the globe, enabling them to diversify their investment portfolios. Diversified across sectors, industries, etc., the investment portfolio capitalizes on the rise of overseas companies. These funds from the perspective of a novice are more risky since it is difficult to comprehend the impact of market fluctuations in a given country and their effect on global and economic developments.
Pros and Cons of Investing In Global Mutual Funds
Here are the advantages and disadvantages of these mutual fund investments:
Pros
- You have the choice to invest in the world’s fastest-growing markets. You protect yourself from the ups and downs of your home country’s markets.
- You have an excellent opportunity to earn significant returns.
Cons
- The investment will be exposed to market dangers, although you may not fully understand the market’s intricacies.
- A change in the exchange rates of important currencies might be detrimental to a portfolio.
Structure of Global Funds
Here is a summary of the various methods in which these mutual funds are formed.
- Direct investment – The local fund manager invests and manages the funds directly.
- Indirect investment – When funds are not invested directly, but rather in:
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- Feeder funds – when the fund house collects investor funds and transfers them to an overseas fund house.
- Fund of Funds – When investing in a Fund of Funds, the investor’s capital is invested in a group of foreign funds.
- Regional Funds – investments in particular regions or countries. Investors can choose to invest in certain regions or countries if they have a solid grasp of the regional economy.
- International Mutual Funds have no regional or national biases and invest in countries worldwide. This results in a diversified fund portfolio.
- Certain global mutual funds invest in stocks based on particular themes. For instance, you can invest in a global fund that invests in energy companies around the world. This is a wonderful alternative if you are confident in the growth of specific industries.
Features of Global Mutual Funds
- Diversification
Since Global Funds invest in equity/debt securities around the world, they provide investors with an excellent opportunity to diversify their portfolios. This also permits investors to capitalize on the market conditions of each country.
- Risk
Due to the fact that the portfolio comprises of assets from a foreign country, it becomes impossible to constantly monitor the country’s social and economic realities. In addition, it is difficult to gather accurate and technical information regarding their market movements. This makes global funds more susceptible to danger.
- Administration of money
Since it is essential to monitor the movements of foreign markets, it is necessary to monitor them in real time. Therefore, the investments are managed by professionals with years of experience managing such investments.
- Exposure
Global Funds invest in equity/debt securities from a variety of nations, allowing them to gain on their investments by taking advantage of the changing conditions in each country. This helps to ensure that the investment portfolio sustains minimal losses.
- Hedge against Inflation
Investing in global mutual funds is an effective method of hedging Inflation.
- Taxation on Global Mutual Funds
For tax purposes, all mutual funds that invest largely in foreign markets are classified as debt funds. Global funds are therefore taxed as follows:
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- If you sell the units within three years of the purchase date, the gains are added to your taxable income and taxed according to your tax bracket.
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- If you sell the units after three years from the date of purchase, the gains are subject to a 20% tax rate with indexation benefits.
Who Should Invest In International Mutual Funds?
Investing in a global fund might be prudent if one understands the fund’s fundamentals. This fund may be suitable for investors seeking to diversify their portfolios by gaining access to several profitable markets. In addition, members who are willing to invest in dangerous products may find a suitable match in global funds, despite the fact that the actual risk factor may change depending on international conditions, politics, etc. Global funds often have a longer holding period, making them suited for investors seeking long-term gains.
List of Best Performing Global Funds
| Mutual Fund Scheme | 5-Year Return | AUM (Cr) |
| DSP US Flexible Equity Fund | 12.90% | 642.03 |
| Franklin India Feeder Franklin US Opportunities Fund | 12.45% | 2,803.31 |
| DSP World Mining Fund | 12.12% | 143.22 |
| PGIM India Global Equity Opportunities Fund | 11.36% | 1,196.80 |
| Edelweiss US Value Equity Offsore Fund | 10.92% | 75.51 |
| Aditya Birla Sun Life Global Emerging Opportnities Fund | 7.78% | 244.11 |
| ICICI Prudential Global Stable Equity Fund | 7.52% | 96.10 |
Source: AMFI (data as on 30/09/2022)
Closer Look of Global Funds/ International Mutual Funds
- DSP US Flexible Equity Fund
This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 30 September 2022, DSP US Flexible Equity Direct Plan-Growth has INR 642.03 Crores in assets under management (AUM) and is a medium-sized fund within its category. The expense ratio of the fund, at 1.52%, is greater than that of the majority of other Global Funds.
The one-year returns for the DSP US Flexible Equity Direct Plan-Growth were -6.20 percent. Since its inception, it has generated average yearly returns of 14.50%. Every six years, the fund has quadrupled the money invested in it.
- Franklin India Feeder Franklin US Opportunities
This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 30/09/2022, Franklin India Feeder Franklin US Opportunities Direct Vehicle-Growth has 2,803.31 Crores in AUM and is a medium-sized fund within its category. The expense ratio of the fund is 0.5%, which is less than what the majority of other Global Funds charge.
The one-year returns for Franklin India Feeder Franklin US Opportunities Direct Fund-Growth are -28.28%. Since its inception, it has generated average yearly returns of 14.90%. Every six years, the fund has quadrupled the money invested in it.
- DSP World Mining Fund
This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 30 September 2022, DSP World Mining Fund Direct Plan-Growth has 143.22 Crores in assets under management (AUM) and is a medium-sized fund within its category. The expense ratio of the fund, at 1.52%, is greater than that of the majority of other Global Funds.
One-year returns for DSP World Mining Fund Direct Plan-Growth are 2.06%. Since inception, it has generated average yearly returns of 2.62 percent. Every three years, the fund has doubled the money invested in it.
- PGIM India Global Equity Opportunities Fund
This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 30 September 2022, PGIM India Global Equity Opportunities Fund Direct-Growth has INR 1,196.80 Crores in assets under management (AUM) and is a medium-sized fund within its category. The expense ratio of the fund, at 1.41 percent, is greater than that of the majority of other Global Funds. The 1-year returns for the PGIM India Global Equity Opportunities Fund Direct-Growth were -33.41%. Since inception, it has generated average yearly returns of 6.39 percent. Every seven years, the fund has quadrupled the money invested in it.
- Edelweiss US Value Equity Offsore Fund
This fund has existed from July 17, 2013 for nine years and two months. As of 30 September 2022, Edelweiss US Value Equity Offshore Fund Direct-Growth has INR 75.51Crores in assets under management (AUM) and is a medium-sized fund within its category. The expense ratio of the fund, at 1.49 percent, is greater than that of the majority of other Global Funds.
The returns of the Edelweiss US Value Equity Offshore Fund Direct-Growth during the past year were -0.44%. Since inception, it has generated average yearly returns of 10.16 percent. Every seven years, the fund has quadrupled the money invested in it.
- Aditya Birla Sun Life Global Emerging Opportnities Fund
This fund has existed for nine years and nine months, having been established on January 1, 2013. As of 30 September 2022, the Aditya Birla Sun Life Global Emerging Opportunities Fund Direct-Growth has 244.11 Crores in assets under management (AUM) and is a medium-sized fund within its category. The fund’s expense ratio of 0.68% is lower than that of the majority of other Global Funds. The one-year returns for the Aditya Birla Sun Life Global Emerging Opportunities Fund Direct-Growth were -14.39%. Since its inception, it has generated average annual returns of 3.01%. Every seven years, the fund has quadrupled the money invested in it.
- ICICI Prudential Global Stable Equity Fund
This fund has existed since August 27, 2013 for nine years and one day. As of 30 September 2022, ICICI Prudential Global Stable Equity Fund (FOF) Direct-Growth has INR 96.10 Crores in assets under management (AUM) and is a medium-sized fund within its category. The expenditure ratio of 1.27 percent is higher than that of the majority of other Global Funds.
The one-year returns for the ICICI Prudential Global Stable Equity Fund (FOF) Direct-Growth were -6.11 percent. Since inception, it has generated average yearly returns of 8.14 percent. Every nine years, the fund has doubled the money invested in it.
Conclusion
Global funds are suitable for investors seeking to capitalize on economic expansion in other nations. These investors have a high risk tolerance and are willing to make long-term investments. Such investments are more suited for experienced and seasoned investors. Examine the leading global mutual funds in India by assessing your comfort level and risk tolerance.
FAQ
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Are Global Fund a good investment?
Investors who are trying to diversify their portfolio across geographies and who have a good understanding of market trends internationally can consider investing in international mutual funds.
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How are Global Fund taxed?
Taxation-wise, Global funds are treated similarly to debt mutual funds. If investors sell fund units in less than three years, they will be required to pay short-term capital gains tax based on the investor’s applicable tax bracket. If the fund is held for more than three years and then sold, the investors will receive indexation benefit and the long-term capital gains will be taxed at 20%.
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When is the right time to invest in international funds?
As many experts say, the time spent in the market is more important than timing the market. So, instead of finding the right conditions for investing, you may want to check if these funds suit your investment needs. First, you should decide if you can tolerate the high risks of these investments. Secondly, you will want to ask yourself if you’re staying invested for longer than 5-7 years. Then, you can decide to invest in these funds.
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