InvestorQ : What is your opinion about investing in the international Franklin US Opportunities Feeder Fund?
Ria Jain made post

What is your opinion about investing in the international Franklin US Opportunities Feeder Fund?

Dia Deshpande answered.
2 years ago

Here is what you need to know about the Franklin India Feeder fund for the US Opportunities Fund.

· Firstly, it is an opportunity for the investors to globally diversify their portfolios by investing in international equities via mutual fund schemes offered by domestic houses.

· Franklin India Feeder - Franklin US Opportunities Fund is one such product on offer, which can enable enhanced returns and also better risk diversification.

· This feeder fund is structured as a fund of funds or FOF and invests in the underlying scheme of the parent.

· The logic for the fund is that a market such as the US has the potential to withstand uncertainties and deliver good returns irrespective of ups and downs

· For example, even in the latest bounce in the global markets, Nifty just reached historic highs but NASDAQ is already 25% above its previous high.

· More importantly, this is an opportunity to invest in sectors that have limited presence in India due to a variety of historical reasons. You get products in short supply.

· Some of the areas you can participate are semiconductors, artificial intelligence or AI, avionics, renewable energy etc.

· It also gives the opportunity to invest in marquee brands like Google, Visa, Apple, IBM, HP, Microsoft, , Netflix, Intel etc.

· One more advantage is the natural rupee currency hedge. Even if the rupee is becoming weak versus the dollar, the international fund can give protection and returns.

· Franklin US Opportunities follows a multi-cap approach of investing so the investor gets large caps and mid caps, ensuring alpha comes automatically.

· Historically, the FUSOF is among the top performing schemes investing in US stocks. It also outperforms domestic equity funds across timeframes by a fairly large margin.

· The scheme has delivered CAGR returns of 42%, 25% and 18% over the last 1, 3 and 5 year periods. That is outstand returns coming with risk diversification.

However, there are two things to be cautious about on this fund. Firstly, this fund is investing in the US when it is at historically high valuations driven purely by liquidity. Whether this is sustainable is not clear. Secondly, the Franklin India Fund has not done too well on its debt schemes and has seen its trust erode. It is not clear what will be their long term outlook on India now. Keep that in mind while taking your decision.