Overseas focused Mutual Fund plans

3-year CAGR higher than average domestic equity market return

WITH the rise in domestic equity market indices, global schemes of domestic mutual funds have began lagging behind in short-term performance, in the one-year period, even as they continue to outperform in longer term, in the three-year period.

 

An FC Research Bureau analysis of 16 global equity schemes with a minimum three-year track record, including global equity fund of fund (FoF) schemes, revealed the average of their compound annual growth rate (CAGR) of three-year returns, at 5.30 per cent to be higher than the corresponding CAGR of 4.04 per cent by domestic equity market benchmark index, S&P CNX Nifty. The median of the CAGR of the threeyear returns of the 14 analysed global schemes was even higher at 5.67 per cent.

 

The analysis was based on their net asset values of November 15 and included only those global equity Pinaki Paul schemes of domestic mutual funds that were benchmarked to international indices but excluded a couple having MSCI (India) Index as their benchmark. The universe included two gold FoF schemes that were indirectly invested in the shares of gold and precious metal mining companies.

 

On one-year performance, 26 global equity schemes with a minimum one-year track record were analysed, and the average of their one-year returns was a poor 5.01 per cent, which was lower than corresponding Nifty's 11.07 per cent return. The median of their one-year returns was higher at 7.53 per cent.

 

But, given the investment challenges and widely-varying expense ratios of global schemes of domestic mutual funds, there was a wide variance not only between the best and the worst performers, but also among schemes having the same international index as their benchmark.

 

For instance, four global schemes had MSCI World Index as their benchmark and the CAGR of their one year returns varied from Principal Global Opportunities Fund's 8.27 per cent to Birla Sun Life CEF-Global MCP's 1.43 per cent, with DWS Global Thematic Offshore Fund and ING Global Commodities Fund being in between with CAGRs of 5.28 per cent and 3.05 per cent, respectively.

On their one-year returns, the variance was even worse with Principal GOF giving the highest return of 11.65 per cent and Birla SL CEF-GM giving the lowest at a negative 1.90 per cent.

 

Interestingly, two differently benchmarked global schemes, but having the same theme, gave returns close to each other. DSP BR World Agriculture Fund, benchmarked to DAX Global Agribusiness Index, gave a one-year return of 7.28 per cent and Birla Sun Life CEF-Global Agri Plan, benchmarked to S&P Global Agribusiness Index, gave a one-year return of 7.53 per cent.

 

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