What’s in a name? Global could sound local for MFs
When an investor puts money in a mutual fund schemes with name tags like ‘fixed income’, ‘midcap’ or ‘pharma’, s/he can be rest assured that 65% of the fund would be invested in bonds or mid-caps or pharma stocks.
By Nishanth Vasudevan, TNN |
MUMBAI: When an investor puts money in a mutual fund schemes with name tags like ‘fixed income’, ‘midcap’ or ‘pharma’, s/he can be rest assured that 65% of the fund would be invested in bonds or mid-caps or pharma stocks.
But, if the scheme is christened as “international” or “global” or even “emerging markets”, a much smaller slice of the fund is invested in overseas stocks. The fund house can’t help it; rules say that no MF can invest $150 million in securities abroad.
However, the tricky question that crops up here is: despite the constraints on overseas investments, should the scheme be named ‘international’ or ‘global’?
In 1994, when SBI MF launched a scheme called Magnum Global, which invested purely in Indian securities, no questions were raised. In 2007, Fidelity MF’s latest launch has been named as ‘International Opportunities’. No one is objecting even today.
The Fidelity scheme, which is still open for subscription, proposes to invest 65% of the total scheme corpus in Indian equities and 35% in international equities. Theoretically, if the scheme mops up more than Rs 1,785 crore, it will end up investing less than 35% in international stocks.
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Responding to an e-mail query by ET on whether the scheme name could cause confusion among investors, a Fidelity spokesperson said, “We would like to draw your attention to the offer document for the Fidelity International Opportunities Fund as approved by Sebi as well as our press release, the KIM (key information memorandum), our advertising and other distributor and promotional material all of which talk about the 65:35 split between Indian and international equities to ensure that the product is well understood. International Opportunities refers to finding opportunities in international markets and that is what our fund aims to do.”BOB MF had launched a diversified equity fund, Baroda Global Fund launched in February 2006 — which invests 35-100% in Indian equities and had the provision of investing up to 35% in domestic money market instruments. SBI MF’s Magnum Global launched in 1994 was aimed at investing 80-100% of the corpus in Indian equities, debentures, and bonds.
However, Principal PNB AMC’s Principal Global Opportunities scheme, which has a corpus of Rs 465 crore currently, invests all its resources in other overseas emerging markets. Most mutual fund industry officials and observers agree the scheme names should reflect the investment pattern of schemes, but there is a feeling that such an approach is practical only if the overseas investment limit for mutual funds is raised.
“I am not sure how viable will it be for mutual funds, with only domestic presence, to raise such limited resources to invest overseas, as costs such as research and brokerages are higher,” said an official with a domestic fund.
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