The American Dream: Red carpet for US-focused funds, shows data

23 overseas funds, ranging from index funds and ETFs to REITs, were launched in 2021

In the calendar year 2021, international funds have been in the limelight as investors have continued to back schemes that invest in global stocks or indices. Schemes focused on US markets and the commodity sector have delivered strong returns in the past one year.

Funds such as Aditya Birla Sun Life Commodities Equities Fund-Global Agri Plan, Motilal Oswal Nasdaq 100 Exchange-Traded Fund (ETF), and Motilal Oswal S&P 500 Index Fund have provided returns in excess of 30 per cent in the past one year.

“Indian investors have traditionally exhibited a strong home bias, with more than 99 per cent of the portfolio being invested in domestic markets. However, a recent trend suggests that international investing has picked up in a meaningful way. Further, a large chunk of money has gone into funds tracking the US market, largely on the back of solid outperformance by US equity over Indian equity,” said Mahavir Kaswa, vice-president-research (passive funds), Motilal Oswal Asset Management Company.

As returns from US funds continued to rise, investors flocked towards them. Funds seeing a surge in their assets under management (AUM) in the past one year were US-focused funds.

In the past one year, Motilal Oswal Nasdaq 100 ETF has seen its AUM surge to Rs 6,099.73 crore in November 2021, compared to Rs 2,337.31 crore in November 2020.

Even as Indian equities have rallied in the past one year, there are a set of investors who wish to invest in companies like Google, Facebook, and Netflix, among others.

The S&P BSE Sensex Index has given returns of 22 per cent in the past one year. Apart from US-focused funds, funds investing in global markets have also done well in the past year.

The success of international funds has led to several funds coming out with such funds in the past year. Around 23 international funds, ranging from index funds and ETFs to real estate investment trusts, have been launched by various fund houses in 2021.

“There are multiple advantages, primary being that of geographic and currency diversification. It is important to invest outside India to access companies not listed locally,” said Aashish P Somaiyaa, chief executive officer, White Oak Capital Management.

However, not all global funds have managed to give positive returns in the past one year. Funds investing in Asian markets, emerging markets, and gold funds have fared poorly.

HSBC Brazil Fund and Nippon India ETF Hang Seng BeES have given negative returns of 26.39 per cent and 12.49 per cent, respectively, in the past year, reveals the data from Value Research.

Industry players are hopeful that even in 2022, international funds will continue to attract investor attention.

“There is no doubt that international funds will continue to be in demand. All opportunities that one may wish to capture may not be accessible in local markets and rising awareness for asset allocation and diversification will also play a role,” added Somaiyaa.

However, market participants say investors should not just look at past returns, but their own risk profile as well before investing in such funds.