International Mutual Funds
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Finance

International Mutual Funds

International Mutual Funds are those that invest in securities of foreign companies listed in foreign markets, which are not available on Indian stock exchange. It provides diversification across different economies, currencies, and growth. It is easily accessible while residing in India. These funds could be defined as funds that are directly investing in global markets, funds that invest in an existing global fund or fund of funds that invest in several funds to achieve international exposure. Investing in these funds is not different than investing in domestic mutual funds.

International funds can have either active or passive management strategy.

Active Management style is when the fund management team is actively involved in stock selection. The choice of the fund is driven by the fund manager and his team.

Passive Management style is when mutual funds are funds that track a particular index or portfolio to match the performance of the benchmark index and not beat it. The manager doesn’t play an active role in fund selection and replicates the benchmark index.

Types of International Funds


  1. Regional Funds- These are country specific funds that invest in specific companies of a region.
  2. Global Market Funds- These funds allow investors from any country. These funds invest in companies across the globe for better diversification.
  3. Thematic International Funds- These funds invest in stocks of foreign companies that belong to a specific theme or sector.
  4. International Commodity Fund- These fundsinvest in a particular precious commodity.

Who should invest in International mutual funds? 


  1. Investors seeking geographical diversification in their overall portfolio.
  2. Investors comfortable with political and economic risk associated with foreign markets.
  3. Investors with higher risk appetite and long term investment horizon
  4. Investors who have strong knowledge about foreign markets
  5. Investors seeking hedge against rupee value depreciation

Benefits of Investing in International mutual fund


  1. Enables portfolio diversification through investments in foreign markets
  2. Any appreciation in the value of foreign currency against rupee will increase returns
  3. Exposure of different economies helps in balancing risk of your portfolio
  4. Some of the global market leaders like Google, Facebook, Tencent are placed on foreign stock exchanges. Thus, international funds are required to invest in these companies.

International Mutual Funds give a wide range of options to the Indian investors to invest in various foreign companies. Investors can use them to benefit from the trends around innovation and disruption in other countries, which may not be available in India.

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