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Despite muted growth, MFs bullish on global equity funds

Press Trust of India  |  Mumbai 

Even though international equity funds are not doing well compared to their domestic counterparts, fund houses are still bullish on such products and have aggressive plans to launch more global equity products going forward.

These fund houses believe that the differential tax treatment to global equity funds was responsible for the muted growth.

As of now, asset under management (AUM) of equity funds for the Rs 12-trillion domestic MF industry stands at Rs 3.65 lakh crore.

Out of this, the AUM of the international equity funds or fund of funds is only Rs 2,469 crore, being run by 16 fund houses.

American fund houses like JP Morgan AMC, which is the largest with over Rs 700 crore in international equity funds, DSP Blackrock AMC, JP Morgan Asset Management etc are the leading players in the international equity funds space.

Currently, investments in domestic equity funds are taxed at 15 per cent if redemption takes place within a year, but no tax is levied in case redemption happens after one year of investment.

However, in case of international equity funds which are treated as debt funds for taxation purpose, they are taxed at 20 per cent with indexation in case of redemption within three years of investment.

American fund house JP Morgan AMC currently has total AUM of Rs 16,500 crore and out of that Rs 2,800 crore are into equities.

However, its exposure into international is at Rs 700 crore.

"We do believe that principal reason behind international equity funds not picking up currently is the differential tax treatment," JP Morgan Asset Management managing director and chief executive Nandkumar Surti told PTI, adding, "we keep giving representation on the issue to the government seeking a level playing field.

"DSP Blackrock Investment Managers is one of leading players globally which is active on the international space.

It runs global equity funds in segments like gold, mining, energy, agriculture and it has recently got global equity allocation fund as well.

Total AUM of DSP Blackrock is at Rs 35,437 crore and Rs 13,436 crore of this were equity funds.

However, the AUM of its international equity funds is only Rs 457 crore.

First Published: Sun, June 07 2015. 14:32 IST