Sun F & C Plans Global Scheme

Sun F&C Mutual Fund is planning to launch an international fund, which will invest in rated debt instruments of foreign countries.

This follows the announcement in the Union Budget wherein mutual funds were permitted to invest in rated securities overseas.

The Reserve Bank of India is yet to notify the guidelines for such investments.

Nikhil Khattau, chief executive officer of Sun F&C, said that by applying to the Securities and Exchange Board of India (Sebi) for such investments, the company hopes to put pressure on the regulators. The fund submitted the prospectus of the scheme to the Sebi on Friday.

 

Khattau said the fund would start with a small corpus of Rs 10 crore and investments would be in rated securities of G-7 countries.

"We are looking only at investment grade papers and government securities," Khattau said.

He agreed that the prevailing low interest rates in the international markets would not give the high returns that investors were used to get in India but it would act as a hedge against rupee depreciation especially if they invest in the US.

Conversely any rise in the interest rates in those countries, post-investment, would also adversely affect the net asset value of the units issued to investors. Khattau agreed that it was a risk they had to take.

Foreign exchange risk, he said, could be offset by hedging. However short-term fluctuations could be evened out in the longer term.

The main idea behind offering the plan was to give investors a wider portfolio diversification, which would lead to risk diversification, Khattau said.

The international scheme is part of a total package of plans launched by Sun F&C under the Fixed Income Securities Fund. It includes three other plans for investors -- all investing in domestic instruments.

The short-term plan invests in fixed income maturities of up to a year. The medium-term plan invests in instruments with maturities between one and three years. The long-term plan looks at maturities of more than three years.