Domestic MFs plan international funds

Domestic mutual funds are again scouting investment opportunities abroad, mostly in emerging markets, as they plan to launch international funds, after more than a year. At least three fund houses-- SBI Mutual Fund, UTI Mutual Fund and Mirae Asset Mutual Fund— are planning to launch international funds soon.

UTI Mutual Fund is planning to launch its international fund, with focus on emerging markets, along with T Rowe Price, which recently bought 26 per cent stake in it. This will be UTI MF’s first international fund, and also its first fund with T Rowe Price.

“Many retail as well as high net worth investors want to invest in overseas markets to diversify their portfolios. The launch of an international fund will depend on liquidity and other market conditions,” said Joydeep Bhattacharya, chief marketing officer, UTI AMC. SBI Mutual fund is hoping to launch its emerging markets international fund by 2010. “Today, there are a lot of investment opportunities outside India for investors who want to have long-term investment plans. There are good opportunities outside India, like carbon credit based investments, among others,” said a source at SBI MF. Both UTI and SBI MF had earlier filed initial papers for international funds with Sebi, but their plans were on hold for more than a year due to the global financial crisis.

Mirae Asset Mutual Fund has filed a draft offer document with Sebi last month for Mirae Asset Korea Discovery Fund, with an investment objective “to generate long-term capital appreciation by investing predominantly in units of Mirae Asset Korea Equity Fund and or units of other MF schemes, units of exchange traded schemes that focus on investing in equities and equity related securities of companies domiciled in or having their area of primary activity in Korea.” In September, Mirae Asset MF had launched Mirae Asset China Advantage Fund, with focus on equities and equity-related securities of companies domiciled in or having their area of primary activity in China and Hong Kong.

Some other MF houses may also launch international funds. “We are evaluating the option as it could be good for investors willing to diversify their portfolio,” said Vikas Sachdev, country head of Bharti AXA MF. Most international fund investments from India are routed through a feeder fund, with an option to invest fully or partly in the international markets. However, for retaining tax advantages, they must invest at least 65 per cent of assets in Indian securities.

“More money is to be made in emerging economies than in developed world. While emerging economies will grow faster, without a meaningful recovery in the US, it will be difficult for countries like India to grow rapidly. Stocks of the developed economies are available at low prices and one can look at launching an international fund with a mix of emerging markets and developed economies. Some allocation can be made to this fund by investors,” said Waqar Naqvi, CEO of Taurus MF. Now, more than a dozen MF houses offer international funds, with majority being lunched in 2007. After the global financial meltdown, no domestic mutual fund house had launched an international MF scheme.