From Rs 5,808 crore at the end of March 2020, total Foreign Assets of Indian fund houses increased to Rs 20,865 crore at the end of March 2021, data released by the RBI presented. However, the net external liabilities of Indian fund houses showed an increase of only 28% during FY 21 to Rs 85.267 crore.
There are several MF schemes in India that invest in stocks that are listed abroad and the trend has suddenly picked up in recent years. These include pure capital funds that invest part of their corpus abroad, and also international funds that invest abroad through the structure of fund of funds (FoF) and exchange-traded funds (ETF), thematic funds, specific funds of country, etc.
Geographical diversification, the strong market rally in recent years and the appreciation of foreign currencies against the Indian rupee are among the most compelling reasons for Indian investors to put their money in these funds, industry players said. Furthermore, a negative correlation between the Indian and overseas markets could also be a reason for Indian investors to put their money there, the sources added.
According to the RBI, most of the money invested by Indian MF investors abroad is concentrated in two countries: USA, which represents 43.3% of the total corpus, while 42.5% is in Luxembourg. The balance is spread across Ireland, Japan, Canada, and several other countries.
Central bank data also showed that the total liabilities of Indian MFs increased in fiscal year 21 by about 46% to almost Rs 1.1 lakh crore. These liabilities are mainly in the form of shares issued to non-residents. Taken together, this led to a net liability of Rs 85,267 crore at the end of March 2021, an increase of approximately 28% over the fiscal year 2020 figures.
Among dedicated international funds, Motilal Oswal MF’s Nasdaq 100 ETF is the largest with a corpus of Rs 5,125 crore, data from Value Research showed. Other big ones include Franklin Templeton’s US Feeder fund (Rs 3,919 crore), Motilal Oswal MF’s Nasdaq 100 FoF (Rs 3,631 crore) and the Motilal Oswal S&P 500 Index Fund (Rs 2,058 crore).
In recent months, Mirae MF, IDFC MF, Kotak MF, Axis MF, BNP Paribas MF, SBI MF and HSBC MF launched international funds. Currently, HDFC MF is ready to launch its Developed World Indexes FoF, its first dedicated international fund. As the name suggests, this fund will invest in stocks from countries such as the US, Canada, Europe, Japan, Australia and New Zealand, Singapore and Hong Kong, the fund’s house brochures showed. These markets have a very low correlation with India and, since they are diversified in various geographies, they would have low volatility. The benchmark for the fund is the MSCI World Index.