Global investing existed in India since the past decade, however, it has picked up the pace post pandemic. A few mutual fund schemes already existed in the market earlier but they were neither popular nor advertised much for the investors to get to know about them.
International investing as a term got popular when one of their best performing schemes Parag Parikh Flexi Cap got into the limelight as this scheme had the mandate to invest up to 35% of its corpus in foreign equities.
The performance of this particular scheme along with the performance of the US stock market were the attraction points for investors to consider overseas investing seriously. This led to a huge number of new fund launches in the foreign investing category, both active as well as passive categories.
Social media influencers played their part by promoting apps that gave you direct access to the US stock market. Apart from the passive index based schemes, some interesting schemes tracking particular sectors were launched to offer concentrated exposure to investors in those sectors.
In this post, we are going to discuss two interesting schemes that were launched by DSP Mutual Fund & Kotak Mutual Fund offering exposure to selected sectors in overseas markets.
READ MORE: Worried over the falling rupee? This is how investing in global funds can help
1) DSP global innovation fund of funds
DSP Global Innovation Fund is a Fund of Funds (it will itself invest in different international funds) which focuses on innovation as its key driver and identifies companies that have innovative thinking at their core, are likely to remain relevant and have the potential to succeed in the long term.
These include emerging innovation themes like Metaverse, Semiconductors, Blockchain, 5G, Gene Technology, Artificial Intelligence, Space Exploration, Electric Vehicles & Robotics etc. The scheme has a mandate to invest in a combination of active and passive funds to achieve the desired exposure based on the theme.
Portfolio as on 30th August 2022:
| Name of Instrument | % of Net assets | Type |
| iShares NASDAQ 100 UCITS ETF | 38.45% | Passive |
| Bluebox Global Technology Fund | 32.25% | Active |
| iShares PHLX Semiconductor ETF | 24.70% | Passive |
| Cash/TREPS | 4.60% | NA |
Scheme was launched on 14th February 2022. The NAV of the scheme is below the offer price of Rs. 10 due to correction in global markets. As per the communication from the fund house, it is suggested to invest in this scheme via SIP route only. However, it is left to the investor to choose if he wants a lumpsum investment or an SIP.
READ MORE: Overseas funds: Why should you explore global securities besides diversification
2) Kotak global innovation fund of funds
Kotak Global Innovation Fund of Fund will invest in units of Wellington Global Innovation Fund or any other similar overseas mutual fund schemes/ETFs. The Wellington Global Innovation Fund is managed by Wellington Management.
Wellington Global Innovation Fund’s investment objective is to invest primarily in equity securities issued by companies worldwide, including emerging markets, which the team believe to be drivers of innovation or beneficiaries of innovation.
Portfolio as on 30th August 2022:
| Name of Instrument | % of Net assets | Type |
| Wellington Global Innovation Fund | 98.82% | Active |
| Cash/TREPS | 1.18% | NA |
Scheme was launched on 29th July 2021. The NAV of the scheme is below the offer price of Rs. 10 due to correction in global markets.
Who should consider investing in global innovation funds?
- An investor who is looking to diversify the portfolio by taking exposure to overseas markets.
- An investor who is bullish on technology, innovation and disruption.
- An investor having an investment horizon of at least 5-7 years.
Tax treatment for gains on fund of funds
In India, gains on fund of funds are taxed as a debt fund in following manner:
- Short-Term Capital Gain Tax: If you redeem your investments within 3 years, then it is termed as Short Term. These gains or profits are added to your income and are taxed according to the tax slab applicable to you.
- Long Term Capital Gain Tax: If you redeem your investments after 3 years, the gains are classified as Long Term Capital Gain. Such gains are taxed at the rate of 20% percent along with indexation benefits.
TIP: Investing in sectoral or thematic schemes is a risky affair. Timing the entry and exit is of utmost importance in playing the themes or sectoral calls. Due to slowdown and inflation worries in the overseas markets, the above mentioned schemes are facing heavy drawdowns. An investor who is looking to take exposure to these schemes should prefer to do it via a systematic investment plan on a monthly basis.
For a lumpsum investor, it is suggested to park the funds in a liquid or ultra-short term fund of the fund house and stagger the investment from that to the global innovation funds over a period of 6-12 months. Finally, one should take assistance from a financial advisor in order to understand about the suitability of this scheme in the portfolio.
CA Rohit J. Gyanchandani is Managing Director, Nandi Nivesh Private Limited, A Pune based Wealth Management Company.
