InvestorQ : Can you tell me about the new international scheme proposed to be launched by SBI Mutual Fund? How can investors benefit from the same?
Dawn Cherian made post

Can you tell me about the new international scheme proposed to be launched by SBI Mutual Fund? How can investors benefit from the same?

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Mitali Bhutta answered.
2 months ago
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Let me clarify that SBI Mutual Fund has already launched a new scheme that will invest in US based stocks. This is SBI MF’s first ever international feeder fund. The new scheme will feed into the Amundi Funds - US Pioneer Fund domiciled in Luxembourg. SBI MF is the largest mutual fund in India in terms of AUM and nearly 50% of its total AUM comes in the form of equity AUM.

The underlying fund in which the feeder fund will invest, delivered returns of 16.27% CAGR in euro terms beating the benchmark S&P 500 Index comfortably. The underly fund has a size of $2.5 billion. These global funds not only permit Indian investors to participate in global markets with limited hassles and in a diversified way, but also help them reduce the risk in their domestic portfolios through international diversification.

The underlying Amundi Fund in typically invested in fast growing technology companies and follows strict ESG rules in stock selection. One big advantage is that when the INR weakens against the dollar, these international funds give additional returns. Another advantage is that the 3-year correlation between the India and US market is 0.6 making a strong case for diversification of risk. The fund has 37% exposure to IT and 15% to consumer discretionary.

Financial advisors have been cautioning about the costs of such funds as they have an underlying expense ratio of 2.25% which is relatively high and could make a dent on returns. For investors there are also other low-cost options available in this area and investors can make a comparative performance analysis before investing. Also the recent global outperformance may be more due to liquidity and that could taper any time soon.

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