In this article, we will be discussing what are International Mutual Funds and what are their different types. So, let’s get started!What are International Funds?
- International Funds, also known as overseas funds are Mutual Funds that invest in assets (Equity, Debt, or other) listed outside the investor's home Country, in our case outside India.
- Currently, there are more than 60 International Funds in Indian markets of different types.
- These funds provide you with diversification opportunities outside domestic markets.
- Their taxation works like Debt Funds irrespective of type.
Types of Mutual Funds:
- International Funds can be broadly classified into 2 categories namely: On the basis of Strategy and On the basis of Investing Style.
- Based on Strategy, there are 5 kinds of international mutual funds, that are:
o Country Funds
o Regional Funds
o Global Funds
o Global Sector Funds
o Commodity Funds
- Based on Investing style, there are only 2 types of international mutual funds, that are:
o Actively Managed
o Passive (Index Funds, ETFs, etc.)
International Mutual Funds based on Strategy:1) Country Funds:
- As the name suggests, a country fund is a fund that invests in a particular country.
Example: Edelweiss Greater China Equity Offshore Fund: A Fund of funds that will invest in companies domiciled in China or whose primary operations are in the Greater China region. Motilal Oswal NASDAQ-100 ETF: An index fund that invests in NASDAQ – 100 ETF. NASDAQ is a US-based stock exchange. HSBC Brazil Fund: A fund of fund that invests in companies listed in Brazil
Example of Country Funds:
2) Regional Funds:
- There are many geography-specific international mutual funds available in India with a high presence of funds focusing on 5 countries: the USA, China, Taiwan, Japan, and Brazil.
- A regional fund is a fund that invests in securities across a specific geographical region like Europe, Asia, etc.
o Franklin Asian Equity Fund: Principally invests in Asian companies/sectors, excluding Japan.
o Kotak Global Emerging Markets: Fund of funds that invests in mutual funds with a primary goal to invest in emerging markets.
o Edelweiss ASEAN Equity Off-shore Fund: An equity fund that invests primarily in companies of countries that are members of the Association of South East Asian Nations (ASEAN).Example of Regional Funds:
3) Global Funds:
- A global fund is a fund that invests in companies that can be located anywhere in the world, whether the investor’s own country or any other foreign country.
o Kotak Global Innovation Fund of Fund: This fund invests primarily in equity securities issued by companies worldwide, including emerging markets.
o HSBC Global Emerging Markets Fund: This provides exposure to equities where economic development is driven by favorable long-term trends, providing a platform for longer-term corporate profit growth.Example of Global Funds:
4) Global Sector Funds:
- A global sector fund invests in specific sectors in the overseas country.
o Aditya Birla SL CEF-Global Agri: A fund of funds that invests mainly in gold mining stocks worldwide
o PGIM India Global Select Real Estate Securities: Fund of funds that invests in stocks of companies operating in the real estate and real estate-related sectors.
Example of Global Sector Funds:5) Commodity Funds:
- These funds invest the majority of their assets in global companies involved in commodity business such as mineral exploration, mining, agriculture, etc.
o DSP World Energy Fund: Invests in the equity securities of companies that have predominant economic activity in exploration, development, production, and distribution of energy.
o DSP World Mining Fund: Invests in the equity securities of companies that have predominant economic activity in mining Example of Commodity Funds: