Some international funds are still open for investments. Here’s a list.

Motilal Oswal NASDAQ 100 ETF, the largest international fund with  ₹7,531 crore in assets under management (AUM), remains open for investments.
Motilal Oswal NASDAQ 100 ETF, the largest international fund with 7,531 crore in assets under management (AUM), remains open for investments.

Summary

  • Fund of funds investing in overseas ETFs won't accept fresh investments from 1 April.

Fund of funds (FoFs) that invest in overseas exchange traded funds (ETFs) will stop accepting fresh inflows from 1 April as the mutual fund industry is close to hitting its $1-billion limit to invest in overseas ETFs. However, investors can still diversify globally as some international funds have headroom to invest in international stocks. These funds, which invest in overseas securities and overseas mutual funds, have been allowed to invest to the extent that their funds have been redeemed.

Here is a look at the international funds that remain open for fresh investments.

Passive funds

ETFs that invest in US markets can still be bought and sold. These include Motilal Oswal NASDAQ 100 ETF, the largest international fund with 7,531 crore in assets under management (AUM), which tracks the performance of the Nasdaq 100 index.

Another large passive fund, the Motilal Oswal S&P 500 Index Fund, also remains open for fresh investments. It tracks the broader S&P 500 rather than the Nasdaq 100, which is dominated by US technology stocks. Mirae Asset NYSE FANG+ ETF also remains available for trading, as does the ICICI Prudential Nasdaq 100 Index Fund, which has 1,113 crore in AUM.

Active funds

Franklin India Feeder Franklin US Opportunities Fund, the third-largest international fund with 3,568 crore in AUM, is also open for subscription. The FoF invests in Franklin Templeton’s US Opportunities Fund.

Other actively managed funds that remain open for subscription include ICICI Prudential US Bluechip Equity Fund, Edelweiss US Technology FoF (which invests in JP Morgan’s US Technology Fund), PGIM India Global Equity Opportunities Fund, and Edelweiss Greater China Equity Off-shore Fund. Many of these international funds are fairly new, having been launched during the stock market rebound in 2020.

Past performance

Technology-focused international funds did exceedingly well in the past year. Data from Value Research shows Mirae Asset NYSE FANG+ ETF delivered returns of 76.3% over this period. The fund tracks performance of 10 US technology stocks, including Facebook (Meta), Amazon, Netflix and Google (Alphabet).

The biggest gains were delivered by AI chipmaker Nvidia, which saw its market cap cross $2 trillion with gains of 249% in a year. Microsoft’s stock is up 56% over the past year, while Amazon is up 78% and Alphabet 40%.

The strong performance of US tech stocks is the reason that funds tracking the Nasdaq 100 Index have done better than those tracking the more diversified S&P 500 Index of late.

Among funds that track actively managed funds, the Edelweiss US Technology FoF did well, giving returns of 59% over the past year. Bandhan US Equity FoF and Franklin India Feeder Franklin US Opportunities Fund delivered 51% and 47% returns, respectively, due to the underlying funds’ high weightage to technology stocks.

At the other end of the spectrum, international funds with exposure to China have delivered negative returns over the past year. Mirae Asset Hang Seng Tech ETF is down 16.5%, Edelweiss Greater China Equity Off-Shore Fund is down 14.5%, and Nippon India ETF Hang Seng BeES is down 12.6% over the past year.

What should investors do?

The number and type of international funds has increased of late. This means investors can get exposure to various regions such as ASEAN, Europe, emerging markets or specific countries, or even themes such as climate change, electric vehicles, semiconductors and so on.

However, financial planners say that instead of making such concentrated bets, investors should stick to more diversified global indices. As the US market alone accounts for 25% of global GDP, financial planners prefer investors to start their international investments through US funds. Vishal Dhawan, founder and chief executive of Plan Ahead Wealth Advisor, points out that active funds have generally found it hard to outperform benchmark indices in the US.

“As investors are moving out of their home country and investing in an overseas fund, we suggest that they don’t take fund-manager risk," he said.

Remember, the funds that are still open have leeway to invest in international securities to the extent that customers have redeemed their funds, so keep an eye out for fund announcements on any breach of this headroom.

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