 "Offshore funds lose out to domestic peers")
Amish Mehra (real name withheld on request), an ultra-rich investor had invested about Rs 1.5 crore, or about 20 per cent of his equity portfolio in offshore funds last year as the rupee weakened and the US economy started showing signs of recovery.
A year later, today, that money has found its way back into the domestic equity market. Mehra is one among many such investors who are moving their investments from the offshore funds to domestic equity-diversified funds. Apart from growth concerns in many global economies, there are other factors influencing decisions of investors.
"Domestic funds are doing better. The dollar-exchange rate is wiping out the gains made through these funds," said Anutosh Bose, chief operating officer, LIC Nomura Asset Management.
Offshore fund-of-funds are feeder funds which invest in equity funds across various geographies and are more suited for the savvy investors with high-risk appetite. The year 2013 saw a huge surge in demand for these funds. But now, with the rupee having regained some of its strength in the last one-year and the Indian equity markets booming, investors are turning to domestic funds.
"India has been an extraordinary market. Even after currency adjustments, you may be better off investing in Indian equities," said S Krishna Kumar, head of equity at Sundaram Mutual.
In fact, in the 12-month period ending October 2014, these offshore funds have delivered average monthly returns of negative one per cent while the Sensex has risen 32 per cent. Of the total 33 offshore funds in existence in the last one-year period, 21 schemes, on an average, have seen their AUMs (assets under management) shrink by 25 per cent.
The largest fund in the category is the Franklin India Feeder - Franklin US Opportunities Fund, which has seen its AUM grow by over 76 per cent to Rs 746 crore during the period. The AUM under the category has increased by over 14 per cent in the one-year period ending September 2014.
During the period, the US markets are up about 10 per cent while the UK FTSE is down two per cent.
Industry officials said that investors are holding onto their offshore funds on hopes of rate hike in US in 2015, which could lead to weakness in the Indian currency.
"The demand for offshore funds also depends on the currency movement. If the rupee weakens even when the domestic market is doing well, people may still want to examine opportunities," said Dinesh Khara, the managing director of SBI Mutual Fund.
Wealth managers though believe that the single-country or single-region focussed offshore funds may not be the best bet for investors.
"Investor allocation to offshore equities should be through more broad-based funds like globally diversified funds rather than through funds which are specific to a country or a region. Focussing on a single region could see some risks," said Nishant Agarwal, senior director and head, products, advisory and family office solutions, ASK Wealth Advisors.
As per AMFI, the folios count in the category has fallen 8 per cent between March and September 2014 to 1.5 lakh.
A year later, today, that money has found its way back into the domestic equity market. Mehra is one among many such investors who are moving their investments from the offshore funds to domestic equity-diversified funds. Apart from growth concerns in many global economies, there are other factors influencing decisions of investors.
"Domestic funds are doing better. The dollar-exchange rate is wiping out the gains made through these funds," said Anutosh Bose, chief operating officer, LIC Nomura Asset Management.
Offshore fund-of-funds are feeder funds which invest in equity funds across various geographies and are more suited for the savvy investors with high-risk appetite. The year 2013 saw a huge surge in demand for these funds. But now, with the rupee having regained some of its strength in the last one-year and the Indian equity markets booming, investors are turning to domestic funds.
"India has been an extraordinary market. Even after currency adjustments, you may be better off investing in Indian equities," said S Krishna Kumar, head of equity at Sundaram Mutual.
In fact, in the 12-month period ending October 2014, these offshore funds have delivered average monthly returns of negative one per cent while the Sensex has risen 32 per cent. Of the total 33 offshore funds in existence in the last one-year period, 21 schemes, on an average, have seen their AUMs (assets under management) shrink by 25 per cent.
The largest fund in the category is the Franklin India Feeder - Franklin US Opportunities Fund, which has seen its AUM grow by over 76 per cent to Rs 746 crore during the period. The AUM under the category has increased by over 14 per cent in the one-year period ending September 2014.
During the period, the US markets are up about 10 per cent while the UK FTSE is down two per cent.
Industry officials said that investors are holding onto their offshore funds on hopes of rate hike in US in 2015, which could lead to weakness in the Indian currency.
"The demand for offshore funds also depends on the currency movement. If the rupee weakens even when the domestic market is doing well, people may still want to examine opportunities," said Dinesh Khara, the managing director of SBI Mutual Fund.
Wealth managers though believe that the single-country or single-region focussed offshore funds may not be the best bet for investors.
"Investor allocation to offshore equities should be through more broad-based funds like globally diversified funds rather than through funds which are specific to a country or a region. Focussing on a single region could see some risks," said Nishant Agarwal, senior director and head, products, advisory and family office solutions, ASK Wealth Advisors.
As per AMFI, the folios count in the category has fallen 8 per cent between March and September 2014 to 1.5 lakh.