Mutual funds queue up to launch US funds

Focus of the fund houses has moved from emerging markets to the US markets due to weak performance by EMs

The outperformance of US equities vis-a-vis most global markets is prompting Indian mutual funds to launch schemes with a US focus. Asset management companies (AMCs) such as Kotak and Religare Invesco have already filed offer documents for an offshore fund of funds in the past month, while SBI Mutual Fund is planning to launch this product soon.

Fund of funds invest in units of other mutual fund schemes. Most emerging market equities have given sub-10 per cent returns, while US markets have given over 20 per cent.

“Investors are looking at broad returns based on economic growth. The US economy has been seeing good economic recovery, which is likely to continue going forward,” said Sandesh Kirkire, chief executive officer at Kotak Mutual Fund.

Kotak US Equity Fund, Religare Invesco US Value Equity Fund and Reliance US Equity Opportunities Fund are some of the products awaiting a regulatory nod. SBI Mutual Fund is mulling the launch of its own US-based equity fund of funds.

“For investors with significant investments in Indian equities, these funds provide an opportunity for diversification of their investments. While investment opportunities in India are still very high, investors would want to look at opportunities outside to make money,” said R Srinivasan Jain, executive director and chief marketing officer of SBI Mutual Fund.

ICICI Prudential, DSP BlackRock and Franklin Templeton already have a US equity-based fund of funds in their portfolio of products. In July, JP Morgan launched its US equity fund of fund – the JP Morgan US Value Equity Offshore Fund.

DSP BlackRock’s US Flexible Equity fund has seen its assets under management (AUM) almost triple in the September quarter to Rs 90 crore from Rs 33 crore at the end of the June quarter. In the year ending September, the fund’s AUM has increased fivefold.

Similarly, the AUM of the Franklin Templeton US Opportunities fund has doubled in the year ending September. Between the June and September quarters, the AUM of the fund rose a little over 50 per cent, to Rs 341 crore.

“These funds have done well and investors have chased performance. The US is a very resilient market and has companies with competitive advantage, which are largely global in nature. So, the case for a US fund for its diversity has strengthened,” said Dhirendra Kumar, CEO of Value Research.

Fund analysts said investors were also showing keen interest in investing in these funds. In the past year, the equity mutual funds have given returns in line with the gains seen on the NSE Nifty, at 7.2 per cent. However, US equities, since January this year, have given returns of about 26 per cent. The NSE Nifty has returned about 3.1 per cent during the same period.