Multi-Asset Global PMS for Overseas education needs
Risk reduction is achieved by exposing the portfolio with a wide variety of instruments and is called diversification. Most times diversification is achieved by employing multiple asset classes with limited correlation. The less correlated they are, the better is the diversification. This allows the portfolio to perform in a consistent way than the undiversified or under-diversified. This is because of the possibility of one asset class to outperform when the other underperforms. It also helps bring down the risk as the factors that influence a particular asset class varies from the other.
The other way of diversification is to expose the same asset class within multiple sub-classes or across various geographies. For instance, equity could be further classified into large cap, mid cap and small cap, with each carrying their own risk and return profiles. Similarly, when equities are considered across multiple geographies then the risk to return profile changes by a lot. Domestic investors would additionally benefit from depreciating rupee which adds to their returns
For instance, comparing the equity benchmarks in 2021 have different returns with Indian NIFTY50 generating over 24% while US S&P500 delivering close to 29% even as China’s Hangseng (Hongkong index) has given a negative 3.4% return. In 2013, the US index has delivered close to 30% return while that of Hangseng had given close to 23% even as Nifty 50 has struggled with 6.7%. Then Taiwan weighted index has delivered close to 24% and 12% resp for ’21 and ’13 resp.
For starters there’re mutual funds (MF) which invest in global markets. Options are available in both active and passive management. This is mostly concentrated to the US, of course one can’t blame, as even the MSCI World Index has majority of the concentration to the US. Funds like ICICI Pru US Bluechip equity fall under the active schemes while MoSL’s S&P 500 index or Nasdaq 100 index funds are passive.
Then there are other global funds like PGIM Global Opportunities fund which act as a feeder fund employing active management strategy with over half of the portfolio in the US and the rest of the exposure to Europe and a bit in the South American continent. ABSL Global Emerging Opportunities Fund which is a feeder to Julias Baer Equity Next Generation fund is largely concentrated in the US & Canada while minority exposures to Europe, Asia and other locations. Invesco Global Equity fund is a feeder fund with about one-third allocation to US, one-fifth to the UK, about a quarter to the rest of Europe and the rest among Asia & other geographies.
DSP Global Allocation fund is a blend of equity and debt where a little over a third of the fund is S&P 500 composite, about a quarter is invested in FTSE World (ex-US), a similar exposure to US Treasury Current 5yr and the rest in FTSE Non-USD World Govt. Bond index.
Kotak International REIT FoF attempts to explore another asset class, Real Estate Investment Trust (REIT). This is a feeder fund to another international REIT fund with portfolio restricted to Asia.
Investors, however, could use the LRS route i.e., Liberalized Remittance Scheme which allows individuals to invest in assets abroad up to USD 250K per annum. There’re platforms including ICICI direct to invest directly in the stocks, ETFs, etc. The setting-up process is cumbersome and brokerage costs could be higher. Then there’re platforms like Kristal.AI which allow investors to explore this route to curated portfolios and even unlisted entities abroad. The concern of what to choose is partly addressed by this offering.
Phillip Capital has introduced a global PMS which invests in a portfolio of equity, debt, REITs, commodities and currencies. They’re registered in GIFT city, which is India’s first smart city and international Financial Services Center (IFSC). GIFT city falls under the IFSCA (fund management) regulations, 2022, is a unified authority for the development and regulation of financial products/services and institutions in the IFSC in India. This does the job of RBI, SEBI, PFRDA and IRDAI combined in the IFSC.
This PMS offering helps investors to sift through more than 45 exchanges covering over 10K ETFs. The fund claims to be long-term focused, with research-driven approach and seamless execution. They could even have the flexibility to trade/invest in non-traditional assets like cryptos and carbon credits. This multi-asset portfolio aims to capture the trends of today and ideas of tomorrow.
This investment is a gateway for NRIs who’re trying to diversify their Rupee assets could also enjoy tax benefits depending upon their jurisdiction. Investors with long-term horizon, higher risk appetite and international needs (like foreign education) could explore this option. A defined or ideal exposure can’t be arrived as this is more to do with the requirement and risk appetite of the investor.
This article is originally published in "The Hans India" daily on 22nd Aug '22.