During the tête-a-tête after an investment seminar where I was invited to speak, I was asked an interesting question by a participant: She hoped to send her 13-year-old daughter overseas for studies post her graduation, and asked me how feasible it was for her to try and open an account with a stockbroker in America and invest in what she called American blue-chips, namely Apple, Facebook and Microsoft.
Given that I had no clue what the rest of her investment portfolio looked like at that point of time, I restricted myself to commenting that it was conceptually a good idea and that she might find it less cumbersome to invest via the Global or International Funds, as these investment vehicles offered by several AMCs in India are referred to.
Well, it may actually be worthwhile for high net worth resident investors with fully loaded portfolios to seek a quasi-currency hedge to their portfolios, even while seeking capital appreciation, by investing in International Funds.
Such funds invest their corpus in designated overseas markets with the USA being the preferred destination, at least if the Assets Under Management (AUM) is anything to go by. It helps Indian investors to invest in the best global companies, most of which are not listed at Indian bourses.
Add to this the historical USD-INR exchange rate relationship and one could expect an additional returns boost via depreciation of the home currency over long term.
Two Funds from this space that we find interesting and hold in our portfolios are Franklin India Feeder-Franklin US Opportunities Fund and ICICI Prudential US Bluechip Equity Fund.
Franklin India Feeder-Franklin US Opportunities Fund is mandated with providing investors with exposure to the best of the US economy, by investing in leading companies across industries and market-caps. It stays focused on growth, quality and valuation, with strong emphasis on flexibility by combining bottom-up stock selection and top-down industry themes.
ICICI Prudential US Bluechip Equity Fund uses a combination of both — a top-down and bottom-up approach — without any sectoral bias or preference. It seeks firms that may have sustainable competitive advantages over their peers as also companies that are global leaders and renowned brands. Investments are made in companies that have a minimum market capitalisation of $ 4 billion as on the date of investment.
The performance record of these two Funds over long-term has been decent, but that by itself does not make it investment-worthy for all and sundry. Such Fund categories are very investor-specific and it is best left to advisors to decide if they merit a fit into an HNI Resident Investor’s Portfolio or not.
There are also International Funds centred around China, Japan, Asia and Europe on offer in the Indian market for those looking for additional geographical diversification. The AMCs that offer some of these funds include Reliance, Kotak and Edelweiss.
But, unless one’s advisor has a comprehensive understanding of the dynamics of both these markets and their currencies, and thus sees an opportunity to gain from such an investment, it could end up becoming an overkill.
Hence, as with any other investments, considerable discretion is called for while deploying money in International Funds. Used judiciously, there is good scope to not just hedge, but also gain handsomely.
(The author heads LKW-INDIA, a Mumbai-based wealth management company. He blogs at www.cricinvest.blogspot.com)