According to a presentation from SBI MF, the underlying fund has delivered returns of 16.27% (CAGR) in euro terms, beating its benchmark S&P 500 Index return of 16.16% (as of 31st January 2021)
SBI Mutual Fund has launched a new scheme investing in US stocks, its first ever international feeder fund. Some of its domestic schemes such as SBI Focused Equity already invest a part of their portfolio in international stocks. The new scheme will feed into the Amundi Funds - US Pioneer Fund which is domiciled in Luxembourg. According to a presentation from SBI MF, the underlying fund has delivered returns of 16.27% (CAGR) in euro terms, beating its benchmark S&P 500 Index return of 16.16% (as of 31st January 2021). The underlying fund has a size of USD 2.5 billion.
"Typically most investments of Indian investors happen in Indian stocks. Global investment will offer strong diversification benefits. The underlying fund has most of today's fast growing tech companies and follows a strict Environmental Social Governance (ESG) philosophy," said DP Singh, Chief Business Officer, SBI Mutual Fund. Rupee depreciation against the dollar tends to enhance the returns of international funds. According to the SBI MF presentation, the rupee has depreciated by 3.29% against the US dollar per year on average (a rolling 3-year CAGR basis). The 3 year correlation between the India and US market is relatively low 0.6, it added. A low correlation means that the two assets perform at different times, reducing the fluctuation in an investor’s portfolio. Information Technology is the largest sector in the underlying fund with a weight of 37.3% followed by consumer discretionary stocks at 15%. The 5 largest holdings are Microsoft, Apple, Alphabet, Amazon and Visa (as of 31st January). The expense ratio of the underlying fund as well as the feeder fund combined is capped at 2.25% per annum under SEBI rules.
Experts asked investors to evaluate all the options for international investing before picking the new launch. "While geographic diversification is important, there are a range of low cost options available in this area. Investors should consider these, including funds with an established track record before making a decision," said Kirtan Shah, Chief Financial Planner at Sykes and Ray Equities (I) Ltd. A number of actively managed funds as well as passively managed Exchange Traded Funds (ETFs) in India track the US market. Shah also warned that some of the strong performance of international funds in the recent past may not be repeated. Over the past decade, the NASDAQ Index has delivered returns of around 25% CAGR in rupee terms.
Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.