International Investing

Niranjan Avasthi – Head – Products & Marketing

Feb 2021
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Why invest in Off-shore Funds?

Diversification benefits
due to low correlation

Access to companies Strong Hedge against

not present in India INR Depreciation

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 World Equity Markets
Rank Country Marketcap (in US$ Tn) % share
1 US 42.60 41.4%
2 China 10.90 10.6%
3 Japan 6.81 6.6% Largecap
4 Hongkong 6.52 6.3%
5 UK 3.28 3.2%
6 France 2.94 2.9%
7 Canada 2.59 2.5%
8 India 2.52 2.4% Midcap
9 Germany 2.49 2.4%
10 Saudi Arabia 2.43 2.4%
Others 27.00 19.3% Smallcap
Total 110.08
Data as on Dec 2020 3
Access to world’s best companies

Some of the world’s best businesses aren’t available in the listed

space in India. For example, Apple, Amazon, Coca-Cola, etc. are not
listed in India

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 Mega trends in technology – How do you play?

Cloud Computing & Electronic Payments

Digital Transformation

Artificial Intelligence / Over-the-Top (OTT) Streaming

Machine Learning

Autonomous Cars 5G Technology

& Machines

Source: J.P. Morgan Asset Management. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market at the date of the publication, constitute our judgment and are
subject to change without notice. There can be no guarantee they will be met.
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 Diversification aids portfolio stability
Performance of world market differs at various time intervals, hence diversification helps

Source: JP Morgan Asset Management. Data for each calendar year 6

India has very low correlation with US Markets

India vs US Markets
16000 4000
Since 1990, correlation between India and US market is only 0.07
14000 3500

12000 3000

10000 2500

8000 2000

6000 1500

4000 1000

2000 500

0 0
1992
1993
1994
1990
1991

1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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2015
2016
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2018
2019
2020
NIFTY 50 LHS S&P 500

Data source: As on Dec 2020 7

Strong hedge against INR

73.07 USD/INR
INR has depreciated against USD @ 4.20% cumulative since Jan 1973 Dec - 2020

10.82 USD/INR
Feb - 1973

Data source: As on Dec, 2020 8

 INR Depreciation lifts portfolio returns

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 CAGR

S&P 500 (US Market) 5.7 -38.3 29.56 13.93 2.6 13.6 34.1 15.3 1.3 11.4 21.9 -5.6 32.2 16.3% 10%

USD Appreciation
-11.1 22.9 -3.6 -3.9 18.42 3.0 13.0 2.36 4.78 2.54 -5.9 9.11 2.0 1.8% 3.9%
against INR

S&P 500 Returns in

-5.4 -15.4 25.96 10.03 21.02 16.6 47.1 17.66 6.08 13.94 16 3.51 34.2 19.3% 15.2%
INR Terms

Nifty 50 (India Market) 56.8 -51.3 77.6 19.2 -23.4 29.4 8.1 32.9 -3.0 5.1 31.6 4.6 13.5 14.9% 11.7%

Blended Portfolio*
44.4 -44.1 67.3 17.4 -14.5 26.9 15.9 29.9 -1.2 6.8 28.5 4.4 17.6 15.8% 13.2%
(80:20)

Blended Portfolio*
31.9 -36.9 56.9 15.5 -5.6 24.3 23.7 26.8 0.6 8.6 25.4 4.2 21.8 16.6% 14.2%
(60:40)

Data source: As on Dec 2020. ACE MF and Trading Economics. Past performance may not sustain in future. *Blended Portfolio (80:20 & 60:40) has higher allocation to Nifty 50 & remainder to S&P 500 9
Options to Invest

Directly through LRS International Mutual Funds

Invest upto $2.50 lakh per year No limit for individual investor

Directly in foreign equities, ETFs, Mutual Invest through FOF or Index fund/ETF
funds which invests in foreign equities

Through online brokers providing such

Online platforms or through AMC
facilities

Capital Gains taxed at 20% after 24 Capital Gains taxed at 20% after 36
months with indexation benefit months with indexation benefit

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 Invest across geographies and themes

Markets Themes
Covering 90% of the USA Technology
42 Funds
world markets
Emerging Markets Healthcare
Europe Mining

FOF, Index Funds & Different ASEAN Energy

ETFs structures
Asia Value
China
Japan
AUM worth Rs.
Size
16,500 cr. Global

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What to look for while selecting a fund?

Markets that are low correlated with India

Currency hedged or un-hedged

Study underlying fund carefully in case investing in FOFs

Tracking error/difference while selecting a Index Fund or a ETF

Portfolio concentration

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Risk & Reward of Offshore Investing

Investment in International Equities is best form of Asset Allocation

Offers diversification across geographies

Risk Exposure to stocks or businesses not available in India

Invests in top Global/MNC companies not available in India
Higher returns expected when other economies grow faster than India

Global market risks which includes market, currency & event risks
Market risks which are influenced by economic factor of the country
Reward
Currency risks/ fluctuation which will impact the NAV of the fund
Event risk like strikes, wars, etc. can put your investments in jeopardy
Geopolitical events like US-China Trade war can make investments
unattractive

Why should you Invest?

Offshore funds are simplest way to invest in international markets
Hedges risk of INR depreciation against foreign currencies
Funds are treated as debt funds for taxation; hence indexation benefit
Offers diversification across geographies
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Thank You

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Know more, www.edelweissmf.com

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