Sundaram Mutual Fund has taken a bet on foreign blue-chip stocks by launching a fund investing in global brands (such as Proctor and Gamble, Microsoft and Alphabet). The AMC has altered its Global Advantage Fund, a scheme focusing on emerging markets into one that invests in international brands. The scheme opened for subscription in its new avatar today (November 21st).
Sundaram AMC has built up some experience in international investing. Sundaram World Brand Fund Series I, II and Series III, all launched in December 2014 have a return since inception (CAGR) of 8.70%, 10.02% and 10.89% respectively. However they were close ended funds which tend to have arbitrary start and finish dates. An open ended fund structure (such as the present launch) allows an investor to pick his or her own purchase and redemption dates and even do an SIP in the fund.
Sundaram Global Brand Fund will feed into Sundaram Global Brand Fund, Singapore which is in turn managed by a 100% subsidiary of the AMC. Sundaram Global Brand Fund shortlists highly ranked brands from companies around the world and then applies additional filters. In other words its starting point is brand power rather than traditional metrics like earnings growth or return on capital. It has a 30 stock portfolio and the current top 10 holdings include Apple, Amazon, McDonalds, Walt Disney and Coca Cola. It has a 59% allocation to the USA, 17.8% to Europe, 7% to Japan and is sitting on a large amount of cash (16.2%). The fund will be benchmarked to the Dow Jones Industrial Average. In rupee terms, the Singapore fund has delivered 13.3% since inception on June 9th, 2017.
The advantages of global investing are enormous. India is about 8% of the world’s GDP and going international will let you participate in the growth of the balance 92%. Also when rupee depreciates against developed currencies like the US dollar this fund will benefit from that depreciation. It is also useful for those who wish to avail for foreign education for themselves or their children (since their expenditure in foreign currencies will be matched against returns in foreign currency). Sundaram Global Brand Fund is country-agnostic and does not force you to pick a market like the US, Europe or China.
However actively managed funds have underperformed their passive counterparts, especially in developed markets like the USA. Among the various international funds investing out of India, the best performer is also a passive fund the Motilal Oswal Nasdaq ETF which delivered 22.05% over the past 5 years. This compares favorably to the 8-10% delivered by the close ended Sundaram World Brand Fund Series. However experts have highlighted the country-risk of a single nation focused fund like the NASDAQ ETF. “The US has done well over the past 5 years but I would rather invest in a country agnostic fund," said Bhavik Dand, a Mumbai based Independent Financial Advisor. “Buying and holding 30 companies with strong brands is an attractive proposition," he said.