Active funds with foreign exposure see demand

Passive funds like exchangetraded funds (ETFS) and index funds focused on international indices may have been all the rage recently, but active funds that hold foreign stocks have also been delivering positive returns over the past few years.

Parag Parikh Flexicap Fund has delivered returns of 49.23 per cent over the past year, and over seven years it has generated returns of around 19.06 per cent, shows the data from Value Research. The fund can invest up to 35 per cent in the overseas securities, and owns stocks such as Alphabet Inc, Microsoft Corporation, and Facebook among others.

“We look for large global multinational companies for investments. Preferably, they should not be operating in only one geography. They should be globalised businesses deriving their benefits from all around the globe. This ensures that we are truly diversified internationally,” said Neil Parag Parikh, chairman and chief executive officer of PPFAS MF.

Having an international allocation also offers investors an opportunity to participate in known international companies. Even the diversification significantly reduces country-specific risks and lowers the portfolio volatility.

Another fund, Axis Growth Opportunities fund has also generated strong returns of 58.15 per cent over the last year. Since its launch in October 2018, the fund has generated returns of 29.06 per cent.

“The purpose of blending an international component is to allow investors to participate meaningfully in both sets of opportunities in a tax efficient manner such that investors get the best of both worlds with meaningfully lower volatility in long term returns and a lower risk profile as compared to standalone domestic or international funds,” said Jinesh Gopani, head equity, Axis Mutual Fund.

Axis Growth Opportunities Fund is a large- and mid-cap strategy, which targets high growth firms and offers investors a flavour of international diversification. Developed and managed along with their advisory partner Schroders, the international allocation aims to invest in globally competitive companies that fall into growthoriented moats that are identified through data driven research.