MFs Lukewarm Over Offshore Investments

October 1, 2007

The domestic mutual fund industry has raised only about $400-500m from local investors for offshore investment schemes, indicating that the hike in the overall limit for such schemes by $1b to $5b by the Reserve Bank of India (RBI) was just an enabler for the industry to offer global diversification for investors and there was no pressing requirement, say analysts. The regulations, which also hiked the individual cap on mutual funds to $300m for offshore schemes, have never been a hurdle for the industry, they say. Fund managers have been making a case for diversification, but going by the trend of some recently launched offshore funds, they are not appropriately diversified. Most of the funds have been investing into emerging markets across Asia, where there is concern about volatility. Most of the offshore schemes launched by fund houses have set apart 65 per cent of their allocation to the booming Indian markets and offer only a part of the funds collected to global stocks. However, high networth individuals (HNIs) or ultra-rich investors may be looking for global diversification even at the present level itself. Vijai Mantri, CEO, Deutsche Asset Management, indicated that customers do not want to look beyond India because of the promise many see there. Mukul Gupta, CIO, Birla Sunlife Mutual Fund, added that diversification is paramount and that Indian investors have to participate in global growth and markets outside India. On the other hand, investors can fall prey to less-knowledgeable fund managers who are anxious to invest overseas. [Source: www.business-standard.com]

MFs Lukewarm Over Offshore Investments

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