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Home Learning Study materials Video |Standard 08th | DD Girnar-Diksha Portal Video @ https://diksha.gov.in | the Year 2020-21
What are international mutual funds?

International mutual funds are those, which predominantly invest in the equity, equity related instruments and debt securities of companies/entities listed outside India. Many of these funds are actually fund of funds schemes, whose underlying foreign funds invest in foreign markets.

Why invest in international mutual funds?

Provides access to high growth companies not listed in India

High growth companies also exist in economies posting lower growth than India

Enables portfolio diversification through exposure to international markets

Provides strong hedge against rupee depreciation (rupee depreciation increases returns from international funds)

Many of the International markets have low correlation with the Indian market 

Reduces the risk to the overall portfolio from adverse domestic events as turmoil in domestic markets rarely impact global markets

List of 10 Best International Funds for 2021

1. DSP Global Allocation Fund

Open ended Fund of Fund scheme investing predominantly in units of BGF – GAF (BlackRock Global Funds – Global Allocation Fund).

May also invest in units of similar overseas MF schemes

Highlights of BGF-GAF

Aims to generate returns competitive with that of global stocks at lower volatility over a full market cycle

Invests in stocks, bonds, currencies and cash equivalents over 40 countries and 30 currencies

Follows rigorous investment process with a top-down macro strategy to decide asset allocation

Follows bottom-up approach for security selection

2. Edelweiss Greater China Equities Off-shore Fund

Fund of Fund scheme investing in the Greater China Fund of JP Morgan Fund

Highlights of JP Morgan Fund – Greater China Fund

Equity fund primarily investing in companies domiciled or carrying out their main business activities in the Greater China Region – China, Hong Kong and Taiwan

Adopts a fundamental bottom-up approach

Follows ‘best ideas’ approach of investing irrespective of listing or market

Takes high conviction approach while investing in just 50 stocks out of 785 stocks in MSCI Golden Dragon Index

3. Nippon India US Equity Opportunities Fund

Invests primarily in high quality – high growth stocks listed in the recognised US stock exchanges

Investment strategy powered by the research support Morningstar Investment Advisor India Private Ltd.

Uses Economic Moats proprietary research methodology of Morningstar i.e. companies with sustainable competitive advantages that enable them to earn excess returns over a long period of time

Uses the ‘Hare’ strategy of investing i.e. invests in companies experiencing rapid growth with sustainable competitive advantages

Uses a blend of bottom-up and top-down approach without any market capitalization or sector bias

4. ICICI Prudential US Bluechip Equity Fund

Invests in equity and equity linked securities of companies listed on recognised US stock exchanges

May also invest in GDRs/ADRs issued by the foreign and Indian companies

Invests in securities of large cap companies included in the S&P 500 index

Follows a combination of bottom-up and top-down investing approaches without any sector bias

Follows a blended approach of growth and value stock-picking

5. DSP US Flexible Equity Fund

Fund of funds scheme investing in the US Flexible Equity Fund of BlackRock Global Funds

Highlights of BlackRock Global Funds — US Flexible Equity Fund

Combines fundamental research and quantitative analysis to identify companies with fundamental inflection points, favourable industry structures and unique business models

Higher weightage to large cap growth stocks in the US

Has the flexibility to either invest in securities with value or growth characteristic depending on the market outlook

6. Aditya Birla Sun Life International Equity Fund – Plan A

Invests in stocks across the globe with no regional bias

Capitalizes on the strengths of individual countries

Invests in top performing stocks even in the markets posting low growth figures

Engages Standard and Poor’s Investment Advisory Services LLC (SPIAS) for investment advice and thereby, leverages their expertise in global equity research of more than 11 years

Maintains diversification and avoids concentration risk by containing its sectorial exposure within a particular range of the sectorial weight followed by its benchmark index i.e. S&P Global 1200 TRI

Uses a blended strategy of top-down and bottom-up approaches without any market capitalisation or sector bias

7. Edelweiss Emerging Market Opportunities Fund

Fund of funds scheme investing primarily in the Emerging Market Opportunities Fund of JP Morgan Funds

Highlights of JP Morgan Funds — Emerging Market Opportunities Fund

Equity fund with an aggressively managed portfolio of emerging market companies

Uses a multi-factor approach by blending top-down country analysis, bottom-up stock selection and disciplined screening process backed by in-depth fundamental research

Prefers countries and stocks offering attractive valuations while avoiding value traps

Aims at building a concentrated, value-oriented high conviction portfolio

8. HSBC Global Consumer Fund

Fund of funds scheme investing in the China Consumer Opportunities Fund of HSBC Global Investments Funds

Highlights of HSBC Global Investments Fund – China Consumer Opportunities Fund

Aims to benefit from long term consumption growth in China

Invests in new consumption themes sprouted by economic development

Uses proprietary fundamental research with integrated ESG ( Environmental, Social & Governance) analysis for stock selection

Focuses on quality companies with sustainable profits and attractive valuations

Seeks broader diversification across local and global champions, income tiers and consumption categories

9. Franklin Asian Equity Fund

Invests in Asian companies (excluding Japan but including India) having a long term growth potential without any sector or market capitalization bias

Follows an active investment strategy taking aggressive/defensive postures depending on market opportunities

Uses a combination of top-down and bottom-up investing approach

Prefers companies offering the best value with regard to their long-term growth prospects, management quality and returns on capital

10. Kotak Global Emerging Market Fund

Fund of funds scheme primarily invested in MGF Asian Small Equity Fund Class I & ishares MSCI Emerging Markets ETF

Has the freedom to shift to other overseas equity mutual fund schemes investing in emerging markets

Highlights of MGF Asian Small Equity Fund Class I

Invests in the small cap companies of the Asian and/or Pacific region

May also invest in warrants, bonds and convertible bonds by small cap companies in Asia Pacific

Highlights of ishares MSCI Emerging Markets ETF

Tracks the investment results of MSCI Emerging Markets Index, which is designed to measure the equity market performance in the global emerging markets

MSCI Emerging Markets Index consists of the top 5 emerging market indexes: China, South Korea, Taiwan, India and Brazil

How are international mutual funds taxed?

Short term capital gains booked on redeeming units before 3 years of investment are taxed as per the tax slab of the investor

Long term capital gains (LTCG) booked on redeeming units after 3 years of investments are taxed @ 20% (along with cess and surpluses, if applicable) with indexation benefits

Dividends are taxable as per the tax slab of the investor. TDS of 7.5% (till March 31, 2021 due to the Covid pandemic; usually 10%) is deducted by the mutual fund house for resident investors. Non-resident investors are subject to TDS of 20%. Tax credit of TDS deducted can be claimed during the time of filing the returns

Risks of investing in international mutual funds

Exchange rate risk: Fluctuations in foreign exchange rates, especially appreciation in the rupee, can adversely impact the returns of international funds

Foreign market risk: International funds expose its investors to the market, political and economic risks of foreign economies the fund is investing in. The risk is higher in case of investing in emerging or frontiers markets lacking in regulation framework, market efficiency and liquidity

Concentration risk: International funds with concentrated investment portfolios may suffer from higher risk, lower liquidity and higher return fluctuations

Who should invest in international mutual funds?

Investors seeking geographical diversification to reduce the risk to their overall equity portfolio

Investors seeking hedge against rupee depreciation, especially those creating corpuses for foreign education or travel

Investors with higher risk appetite and long term investment horizon of at least 5 years seeking to supplement their existing domestic equity exposure with foreign economies

Investors comfortable with significant fluctuations in their investments value

Investors comfortable with the additional political, market and economic risks associated with foreign market

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