MUMBAI: The downturn in global equity markets has knocked the wind out of the sails of international fund offerings by Indian asset management companies. Net asset values of most funds in this category have nearly halved as a result of the relentless battering of stocks across the world.
Contrary to popular perception, investment diversification into Asian and LatAm markets have not helped investors de-risk their portfolios. Though it would be unfair to judge mutual funds over a shorter timeframe, for indicative purposes (as not many funds have completed one year since launch), the three-months return profile of most India-based offshore funds have fallen in the range of 18-36%. Funds that have completed one year have dropped in the range of 38-46%. ICICI Prudential MF CIO Nilesh Shah admits some wrong calls on the part of most asset management companies with respect to launching offshore funds. "In our case, we launched the fund at the peak of bull-run. In those times, Indian shares were very expensive and there was a need for diversification into overseas market and lesser expensive stocks," Mr Shah said. Last year, the decoupling theory was a rage among economists and market participants who felt that emerging markets stood to benefit from any weakness in developed markets, as investors seek safe havens. The whole presumption went wrong when emerging markets actually recoupled with the US economy and became highly correlated with markets in that country. "When the downturn began in the US, it impacted emerging markets more, squarely contradicting set theories. As a matter of fact, emerging markets fell more than American and European markets - the epicentre of the current financial turmoil. Emerging markets (especially Asia) failed to deliver the returns we expected," Mr Shah added. A conscious decision or otherwise, in their bid to escape volatility, offshore mutual funds are now increasing their exposure to overseas equities that have fallen comparatively lesser than the home market. Though a bit lower from the peak attained in June, fund allocation into overseas assets have risen 46% (from January) to Rs 5,400 crore as on September 30, 2008. According to Valueresearchonline.com, fund managers had allocated Rs 3,697 crore in January, Rs 5,224 crore in April and Rs 6,794 crore in June to buy assets in overseas markets. Most funds, falling under this genre, resort to the basic structure of investing around 60% of the assets in equities and foreign mutual funds units and the remaining in debt and money market instruments. "There is a marginal rise in exposure to overseas equities; but that has not helped funds as most of it has been invested in volatile markets. Equity markets are volatile in every part of the world. Our allocations are constantly changing. We are buying stocks of good companies, irrespective of which regions it belong," said Birla Sunlife AMC CIO A. Balasubramanian. http://economictimes.indiatimes.com/Meltdown_halves_NAVs_of_funds_with_global_focus/articleshow/3633202.cms?from_et_mkt_newsltr=1 Fear is not the natural state of civilized people. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
