Yesterday I wrote about investing in US based funds in India, and I think the most practical way for Indian investors to buy into these funds is to buy mutual funds and ETFs that trade in India and then in turn buy assets in the US.
There are two types of risks that you take when you buy such a fund – the first one is the risk that the American markets fall, and the second one is the risk that the Rupee appreciates. If the Rupee appreciates against the Dollar then the value of your holding will reduce and that’s something we discussed yesterday, and you can read that post to get more details on that. (Read: Utility of US Based Funds in India)
As far as I know there are only three such funds currently trading in India. Here are the details of each of these.
| Fund Name | What does it invest in? |
1 Year Return |
2012 Annual Return |
| MOSt Shares NASDAQ 10 | Passive funds that invests in NASDAQ 100 stocks. |
29.3% |
16.4% |
| ICICI Prudential US Bluechip Equity Fund | Actively managed fund that invests in in securities of large cap companies that are part of S&P 500 listed on NASDAQ and NYSE. |
32.6% |
5.4% |
| DSP BlackRock US Flexible Equity Fund | This is a fund of funds that invest BlackRock Global Funds US Flexible Equity Fund, which is an actively managed fund that invests in American securities. |
– |
|
| FT India Feeder – Franklin U.S. Opportunities Fund | Is an open-end fund of funds scheme investing overseas that seeks to provide capital appreciation by investing predominantly in units of Franklin U. S. Opportunities Fund, an overseas Franklin Templeton mutual fund, which primarily invests in securities in the United States of America. |
8.5% |
Update: Added Franklin Feeder US Opportunities Fund after receiving Devadoss E’s email below.
I am sorry to say that your inputs are not exhaustive .
Thus, you have clearly left out the top performing Franklin Feeder US Opportunities fund !So, before you continue to write your inputs, think well and review before publishing !Sincerely,Devadoss E
Thanks manshu I will wait for that post. It would be great if you can include tax implications of USD investments. .I believe it is tax free in US because of US 8Ben. But in india how will such income be treated I am not sure.
Thanks for the input – I’ll keep that in mind.
Income from International funds are taxed similar to a debt fund.
Debt Mutual Fund – Sold within one year, income generated is clubbed with individual`s income and is taxed as per the individual`s tax bracket. Sold after one year, income generated is taxed as 10% without indexation and 20% with indexation whichever is less provided plus surcharge and cess.
Regards
– Kapil Visht
All,
Recently there is a new US based fund in the pipeline. The fund is being launched by JP Morgan group – JP Morgan US Value Equity Off-shore fund. The fund is a fund of fund and invests in JP Morgan US Value fund. The fund will follow a value style investing and subscription will be open from July 17 to July 31.
Regards
– Kapil Visht
All,
The Motilal Oswal Nasdaq 100 ETF was the first US based fund launched in India and it’s one year returns were around 46%. People were gung-ho about the performance of the fund, however the real fact was not the US markets performed better than the Indian markets but the fund’s performance was mainly due to the Rupee Depreciation.
Please go through the following article which talks about the fund’s performance in detail – http://mostnasdaq100etf.blogspot.in/
Regards
– Kapil Visht
Are these US funds also regulated by sebi? I wonder if there is gimmickry when computing daily NAV. Increasing management fees could be a good reason.
Yes, these are under SEBI purview as well and I don’t know of any problems or irregularities with them till date.
FT India Feeder Franklin US Opportunities is one more. In fact,it has a pretty good record.
Thank you Pattu – I have included the fund here.
Manshu- can you let us know ways of investing in US mutual funds directly in USD, thereby reducing currency fluctuation risk if rupee depreciates.
I was going through some articles where they suggested for investing in US based index funds but to do it from INDIA was not there
Raghvendra – you can open an account with a US based brokerage in India and trade. I’ll try to see if I can do a post on this or link to a good post about this.
The above proves that active management is futile, passively managed fund was the best.
If one believe that Passive funds are better than Actively managed, I would suggest that ETF would be even better choice.
Those who track Mutual Funds investment activity and believe that MFs can make good investment decision should look at the following page
http://www.quantspartner.com/Updates.aspx
Sorry I left out a good performing active managed fund in my list. Added that now.