Skip to main content

Whar are Feeder Mutual Funds or Fund of Funds?

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Feeder Mutual Funds


To an average Indian investor, global investing is a relatively unexplored territory and would definitely seem like a road less traveled. However, such global funds do exist for Indian investors and are either geographically specific or thematic in nature. They invest into a specific market, such as the US, China or Brazil, or into a region, such as Asia ex-Japan or the emerging markets. The themebased ones focus on gold mining, energy or agri-business.



Despite being around for a number of years, global funds have only recently picked up in terms of sheer number available. As per AMFI data, in early 2008 there were around six global feeder funds available in India. By October 2013 that number swelled to 23. This is only poised to increase as a number of fund companies have filed offer documents with Sebi to launch such funds.


The total assets managed by these funds stood at around Rs 2,400 crore (less than 1% of Indian fund industry’s assets) at the end of October 2013, as per AMFI data. Compare this with the world’s largest mutual fund market, the US. As per the ICI Factbook 2013, domestic equity funds constitute around 33% of total US fund industry assets, while international equity funds account for 12% of industry assets.


Reserve bank of India increased the overseas investment limit for mutual funds in India to $7 billion in April 2008 (from $5 billion at the end of 2007), with an individual fund house limit of $300 million. However, till date the total assets managed by such funds in India is nowhere close to the overall limit.


Benefits and Limitations


The most obvious benefit of global feeder funds is geographical diversification. Indian investors tend to question the logic of investing in global funds when the Indian market is doing well. It is this mindset that results in such funds gaining traction when the Indian market is underperforming its global peers, as has been the case in 2013.


It is worth remembering that all markets go through periodic cycles. There is no certainty that a particular market performing well presently will continue to outperform every year on a regular basis. This year itself, India has under perfor med a number of developed markets by a significant margin. Also, during the market downturn of 2008 and 2011, the Indian market was a relative underperformer when compared to a number of other international markets. An allocation to global funds in a portfolio would have helped to diversify risk.


A huge disadvantage of such funds is the unfavourable capital gains tax treatment, as compared to domestic equity funds. Funds investing primarily in foreign securities (even equities) and Fund of Funds (FoF) schemes are not considered as equityoriented funds by the taxmen in India. Thus they lose out on the beneficial capital gains tax treatment of equity-oriented funds, which are presently subject to a short term capital gains tax of 15% (plus surcharge and cess) while long term capital gains is exempt from taxation. However, for other funds (which are not equity-oriented), short-term capital gains are taxed at the applicable income tax rate, and long term capital gains are subject to a tax of 10% (without indexation) or 20% (with indexation).


Global funds also carry currency risk. Appreciation in the rupee will drag down returns for global feeder fund investors, while depreciation in the Indian currency against the dollar (in which the underlying parent fund is denominated), helps to boost returns. We have seen the latter scenario play out in 2013, when just a few months ago the rupee fell to historically low levels.


It’s difficult for an individual investor to time currency moves, as it can go either way. Therefore, the main premise of investing into global funds should be to diversify one’s portfolio geographically, not to make a currency gain. This helps lower the risk of a portfolio too.


As the Indian market matures and opens up, global funds are likely to find wider acceptance amongst portfolios of Indian investors. However, these funds may not be suited for first-time or novice mutual fund investors. The idea should be to first build up a domestic portfolio, and then diversify it using the medium of global funds

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief ‘96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...
Read more

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more

Health for Wealth - How to buy Health Insurance ?

Tax Saving Mutual Funds Online Current open Infra Bond Application form   HEALTH insurance is a relatively new phenomenon in India. Hence, it is not on the top of the mind for most people to make a conscious commitment towards health insurance. However, it is imperative for each one of us to plan for better health for our families and ourselves. There's no better way than to start with making health your top priority this year. So, your health insurance resolution charter would look something like: ■ Invest in health for wealth: Timely investment in health insurance can help build a security net and hedge sudden dilution of another financial asset class in the event of a health emergency, making it imperative to opt for a comprehensive health insurance plan. ■ Buy a comprehensive health cover that fu lfills your health needs for life: Buy a personal health insurance cover even if you have an employee cover because 'employer provided' health insuranc...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now