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Why investors shouldn't worry about international funds?


Many mutual fund investors are worried about whether they will be able to continue with their investments in international funds. Even though Sebi allowed fund houses to accept money from investors and invest in overseas stocks, many investors are worried that fund houses may again stop accepting money once the industry breaches the overall limit of $7 billion. Earlier Sebi asked mutual funds to stop accepting money in schemes that invest abroad. The move hit not just international funds that invest most of their money abroad, but some other schemes like Parag Parikh Flexi Cap Fund that invests a part of its corpus in international stocks.

Several prominent fund houses like Aditya Birla Sun Life, Franklin Templeton, Mirae Asset,

, Invesco, PGIM India, Nippon India, among others, have started accepting money in their various international schemes. Several other fund houses are still waiting for clarity. As things stand today, fund houses can accept money provided they don’t breach the limit and overall limit for the industry. Skeptics say soon the industry will hit the limit and they will be again forced to shut these schemes.

“It seems, the overall limit is unlikely to go up anytime soon. If that is the case, investors will have to rethink their investments in international schemes,” says a mutual fund advisor who didn’t want to be named. Mutual fund industry believes that the RBI is unlikely to raise the overall limit soon since there are questions about Rupee strength. Many industry participants say they are a bit confused since individuals still can take money out of the country. Indians can take $250,000 from the country every year. It’s all confusing is the standard response from many mutual fund participants.



Many mutual fund advisors say investors should not get worried about this development. “I guess it has become a fad among many investors to put money in foreign funds. Many believed that investing in Nasdaq and other indices were far superior to Indian stocks. And some experts were encouraging it,” says a wealth manager.

Several mutual fund advisors say they were recommending investing in international schemes for diversification. They say some schemes like Parag Parikh Flexi Cap Fund also attracted investors because they managed to offer superior returns because of their exposure to overseas stocks.

“We are telling investors that you were investing 10-20% of your money in international funds because you wanted to diversify your investments. A good option was there, so we were using it,” says the mutual fund advisor. Advisors like him say Indian markets will offer superior returns than developed countries over a long period of time. Investors should stick to well diversified equity mutual funds to benefit from the India growth story.



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