International exposure and ease of doing business have led to the world becoming a “Global Village”, with it possible to make huge profits on investments in the global market. With companies aiming to establish themselves as global entities, more products and services are available, spanning different continents. Global Mutual Funds aim to utilise this globalisation effect to offer benefits to all those involved.
What are Global Funds?
A Global Fund, as the name implies, is a mutual/exchange traded fund which primarily invests in companies/enterprises which are spread across the world. It is global in its approach and diversity, aiming to have holdings in different parts of the world. The differentiating factor of a global fund is that it should include investments in the country of the investor as well.
For example, a mutual fund firm from India can invest in markets in USA, UK, UAE, India and China, making it a global fund.
Features of Global Funds
Some of the distinguishing features of a global fund are highlighted below.
- Diversification – The primary motive behind investing in a global fund is to diversify the investment portfolio of an individual. Most such funds invest in different securities in different countries, aiming to have a wide array of investment instruments at their disposal.
- Risk factor – Investing in a global fund comes with a different set of risk factors, with this risk depending on country specific policies and market conditions. A diverse portfolio typically reduces the risk factor, but changes in a country can adversely impact a fund.
- Own country – A global fund, while investing in foreign countries, also invests in certain instruments in the own country of an investor. For example, an Indian Mutual Fund company offers a global fund which invests in emerging markets like Brazil, Singapore, Hong Kong and India.
- Currency factor – Fluctuations in international currency can have a major impact on the performance of a fund, with such funds exposed to currency risks.
- Hedge – A global fund functions as a hedge against inflation.
- Returns – Returns offered by a global fund could vary, according to multiple parameters.
- Term – Most global funds are long term funds, with investors looking for returns after a certain period.
Who should invest in Global Funds?
Investing in a global fund can be a smart move, provided one knows the basics of this fund. Individuals looking to diversify their portfolio, aiming to have multiple markets through which they can earn a profit might be suited for this fund. In addition, members who do not mind investing in a product which is risky might find a decent match in global funds, albeit the actual risk factor might vary depending on international conditions, politics, etc. The time period for a global fund is typically more, making it suitable for investors looking at long-term gains.
Difference between Global Fund and International Fund
A common mistake most investors make is to confuse a Global Fund to be the same as an International Fund. While both these might sound similar, there is one key factor which differentiates them.
A global fund primarily invests in markets across the world, including those in the own country of the investor. An international fund on the other hand has no investment in the home country of an investor, with all funds concentrated in global/international markets.
This difference can be understood through the example of a trading company from India. The company invests in markets across Asia and the Middle East, with a certain investment set aside for the Indian market. Individuals who invest in this fund are participating in a Growth Fund. Now, if the company were to invest only in international markets, excluding India, then investment in this fund would be classified as an international fund.
Popular Global Funds in India
Some of the popular global funds in the country are mentioned below.
- SBI Magnum Global Fund
- Tata Indo-Global Infra Fund
- ICICI Prudential Global Stable Equity Fund
- Kotak Global Emerging Market Fund
- Principal Global Opportunities Fund
- Aditya Birla Sun Life Global Real Estate Fund
- Aditya Birla Sun Life Global Commodities Fund
- DHFL Pramerica Global Agribusiness Offshore Fund
- DSP Blackrock Global Allocation Fund
- Invesco India Feeder - Invesco Global Equity Income Fund
Mutual Fund investments will be subject to market risks. Any mutual fund listed in the document does not guarantee fund performance or its underlying creditworthiness. Do read the mutual fund document thoroughly before investing. Specific investment needs and other factors have to be taken into account while designing a mutual fund portfolio.
GST rate of 18% applicable for all financial services effective July 1, 2017.