Who’s investing?

IIPM MANAGEMENT INSTITUTE

MFs are! And overseas...jump in if you want to roll it...

It’s not child’s play any more! After all, it’s your money and you have the option of getting the best out of it. How about buying a global mutual fund for your teenage daughter on her birthday? Sounds eccentric, right? The fact is that we are not far from such a situation. MFs are queuing up to tap the investors’ hunger for global markets with schemes aimed at investing in other countries.

Most promisingly, both DSP Merrill Lynch & Kotak MF have already launched their global funds recently. UTI MF & HSBC Asset Management Company also have plans to launch similar new schemes that would allow investors to invest overseas. But do we take this as an alternate investment option, and at a time when the Sensex is busy playing the ‘hide & seek’ game and making the market more volatile?

Sandesh Kirkire, CEO, Kotak Mahindra MF, commented to us, “In an increasingly integrated financial world, the rise & fall has been a factor of liquidity play; and therefore diversification remains a critical factor. The emerging markets today display greater buoyancy and hold nearly 60% of the global forex reserves. Consequently, the risk perception about these (foreign) investment destinations has come down and investment in these markets is seen as a relatively safer option providing adequate diversification cover.”

Truly, the ongoing volatility does certainly provide a more attractive entry point for global funds! Ironically, while on one hand, India would continue to remain an attractive destination for foreign investments, on the other, Indians themselves are going global behind these funds. Factually, many of the emerging markets are witnessing a burgeoning of domestic demand while their overall industrial wage competitiveness remains strong; ergo, it is quite likely there exists much room for growth and stock appreciation in such economies. Confirms Kirkire of Kotak, “The growth in developed markets has largely saturated and their real growth rates remains in the 0.5% to 3% range. In comparison, most emerging market economies are growing above 5.5%, and will continue to do so for a long time. This growth is nearly 50% higher than that of developed markets.”

Amit Saxena, CEO, Planman Financial, additionally commented, “Such overseas investments would get a boost as recently there has been upward revision by RBI in the limits set earlier on overseas MF investments; and this even though the earlier limits were not fully utilised by the MF industry.” When B&E questioned Vijai Mantri, CEO, Deutsche Asset Management, India, he agreed and gave a similar perspective that there seems to be a gain in the momentum of global funds after RBI eased norms for MFs’ investment in global markets. Most industry experts gave similar affirmative answers to B&E.

Clearly, though all this does not mean that we are not believers in the India story, given the current scenario in the Indian stock markets, it makes more sense to provide investors the growth potential of emerging markets with an intention to allow them to diversify their portfolio risk. This would definitely pave way for more innovative themes in the global investment space. And better for the retail investor, international credit rating agencies are now ever-ready to rate the viability of such investments. If you’re still in two minds, just gift us your money, we’ll do the needful.

B&E research: Sunanda Roy

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative