MFs with global exposure in the red

Average 1 year returns of most funds with International focus fall between 3 to 15%.

The global economy may well be climbing out of recession. But mutual funds (MFs) with exposure to global markets and overseas funds are still in the red. The average one year return of most funds with a global focus has declined between 3.4% and 14.5% data show. Those with a strong exposure to US companies have suffered the most while funds that invest in emerging markets and Asia have weathered the storm.

While MFs have posted strong returns on the back of a sharp rally in the equity markets here, their peers that invest abroad have lagged behind as benchmark indices in several benchmark indices in several markets have not kept pace with the Indian markets.

Most developed markets have returned about 40% lower than India (indices). As a result global focused funds have not recovered fully, says CIO, equity ICICI Prudential MF.

Though Sensex and nifty have gained only 2.7% and 2.3% in one way (up to September 2) nearly one in every three diversified equity MF has given double digit returns during the period. In all, 196 out of the 250 funds under consideration for the period managed to stay in the positive territory.

Sensex and nifty are the second best performing indices among emerging markets and have outperformed the Dow and Nasdaq by a wide margin. While Sensex and Nifty have gained 65% and 59.9 %. In the year (up to August 28) the Nasdaq and Dow gave only 28.5% and 8.7 returns. Even the Hang Seng and Shanghai composite have underperformed key Indian indices posting 39.7% and 57.1% returns.

Many of these markets are dependent on international trade. In some of these geographies the share of commodities is relatively much higher.

Since domestic demand drives the economy here we have done better. However with the economic recovery taking shape in the west the stocking of goods is expected to gather steam improving performance of export driven Asian economies.

It is a good opportunity to invest, India has outperformed most global markets till now but this is likely to come down. Funds that focus on global markets make for an ideal diversification option and can be considered in the long term, say industry players. Once the global markets revive faster, their returns would be much better.

1) Mutual funds with a strong exposure to US companies have suffered the most
2) Most developed markets have returned about 40% lower than indices. As a result global focused funds have not recovered fully.
3) Though sensex and nifty have gained only 2.7% and 2.3% in last year, nearly one in every three diversified equity MF has given double digit returns during the period. In all, 196 out of the 250 odd funds managed to stay in the positive territory.

Some of the predictions, sentiments and opinions expressed by various forums above may not come out to be true in case of India. While we agree that developed countries markets may revive after some time India’s strong point can be their continuous and steady increase in consumption patterns. The rate of returns in India’s case may always be higher for the obvious reasons of low overhead costs, and manpower costs. Here the man power is amenable to working longer and does not demand a 40 hour week with 2 weekly holidays like U.S.

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