Domestic diversified equity schemes investing in the Indian stock market have outperformed global funds in one-month returns from July 22 to August 22 as Indian indices showed uptrend compared with its global peers.
During July 22 to Friday, both Bombay Stock Exchange’s 30-share Sensex and National Stock Exchange’s 50-share Nifty rose 2 per cent as crude oil prices eased. In comparison, China, Singapore, Indonesia, Japan and Taiwan stock markets shed 17 per cent, 5 per cent, 4 per cent, 3 per cent, and 2 per cent, respectively.
| SURPLUS SEASON One-month returns of top 10 global and domestic funds | |||
| Scheme | Return (%) | Scheme | Return (%) |
| Global funds | Domestic funds | ||
| DSP Merrill Lynch World Gold Fund | -20.55 | UTI Master Value Fund | 8.96 |
| AIG World Gold Fund | -16.51 | UTI Mid Cap Fund | 8.54 |
| Principal Global Opportunities Fund | -6.71 | JM Contra Fund | 7.43 |
Markets Fund
Cap Fund
Global Advantage Fund
Dynamic-Institutional
Offshore Fund
Infrastructure Fund
International Fund Plan A
Small Cap
-India Fund
Opportunities Fund
Cap Fund
Indian mutual fund industry has 14 global funds that invest its corpus in overseas equities. DSP World Gold Fund was the worst hit global fund with negative returns of 20.55 per cent. The scheme invests in Merrill Lynch International Investment Funds’ World Gold Fund, which in turn invests in companies involved in gold mining overseas.
Recent strong trend in dollar and slackening crude oil prices led to fall in overseas gold prices, pulling down returns of DSP Mutual’s feeder fund. This was followed by another gold fund from AIG that gave negative returns of 16.51 per cent.
Adverse news flows from world’s largest economy and also its financial majors such as JP Morgan Chase and Co reporting losses in its second quarter led to meltdown in global equities, and in turn impacted performance of global funds.
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Principal Mutual, which manages Principal Global Opportunities Fund, is the pioneer of global schemes in India. The scheme invests in global markets through US mutual fund arm, Principal Global Emerging Markets Fund. Launched in March 2004, the scheme has recorded one-month negative returns of 6.71 per cent in global funds category.
Kotak Global Emerging Markets Fund posted negative returns of 5.82 per cent. It invests in T Rowe Prices’ Global Emerging Markets Fund, while DWS Global Thematic Offshore Fund deploys its corpus in Singapore-based DWS Strategic Global Themes Fund.
Kotak Indo World Infrastructure Fund, however, gave positive returns of 2.37 per cent over one-month, the highest among global funds.
In comparison, top performing open-ended diversified equity scheme UTI Master Value Fund gave 8.96 per cent returns followed by UTI Mid Cap Fund and JM Contra Fund that offered 8.54 per cent and 7.43 per cent returns, respectively.
Of the 209 open-ended diversified equity funds, 144 gave returns higher than the top performing global fund. Even in close-ended diversified funds, of the 50, 45 gave returns higher than Kotak Indo World Infrastructure Fund.
DBS Chola Infrastructure Fund posted highest returns of 16.69 per cent among close-ended diversified schemes. Average return registered by open-ended and close-ended diversified funds was 3.16 per cent and 5.35 per cent, respectively.
The increase in overall as well as individual mutual fund limit for overseas investments has led many fund houses to plan schemes that will bet on global stocks.
Recently, JPMorgan Mutual Fund filed for JPMorgan Emerging Europe, Middle East and Africa Equity Offshore Fund, an open-ended fund of funds scheme.
The fund will invest primarily in companies incorporated or which have their registered office located in, or derive predominant part of their economic activity from, an emerging market in central, eastern and southern Europe, West Asia or Africa.
Also, ING Mutual launched its Latin America Fund while new fund offer of Mirae Asset Mutual’s Global Commodity Stocks Fund closed last month, while Optimix Global Commodities Fund, an open-ended fund of funds scheme closes its subscription on Monday.
Even over one-year horizon, returns of global funds are less than diversified domestic equity funds.
“Global funds are means of currency diversification, market diversification, or geographical diversification so the returns are not comparable,” said a chief investment officer from a private mutual fund. Principal Global Opportunities Fund was the only global fund to give 1.22 per cent returns over a year.
In case of open-ended diversified funds, 53 of the 180 gave returns over 1.22 per cent, and the best performing scheme, Reliance Regular Savings Equity, registered 22.63 per cent returns.
Of the 29 close-ended diversified funds, two funds gave returns over 1.22 per cent with top performing IDFC Enterprise Equity Fund with 4.98 per cent return.