The Hindu Business Line : Demand for feeder funds on the rise

The demand for feeder funds – products open to Indians, for investing in international funds – is on the rise, a trend that the local asset management industry is set to cash in on in the coming days.

A number of feeder products are said to be in various stages of discussion, being conceptualised by players that are exploring ways to provide investors greater access to global markets.

Domestic fund houses are increasingly looking at partnerships with international outfits to tap what some quarters feel will emerge as an important area for them.

The situation, sources say, can be best understood in the context of signals that have recently come into view. They refer particularly to the marked increase in the size of Principal Global Opportunities, which not long ago altered its strategy in line with changing norms for overseas investments.

The fund’s AUM, which stood at less than Rs 20 crore around this time last year, scaled up to over Rs 400 crore in January 2007. The May-end tally was Rs 550 crore. In its new avatar, this has become a feeder product, investing in PGIF Emerging Markets Equity Fund.

Growing awareness

Also, fund circles refer to the growing awareness about emerging markets among more Indians. More investors are willing to take exposure to such markets these days, a move that will ensure them geographical diversification.

It may be mentioned here that besides Principal, a couple of others offer products with an international slant. Franklin Templeton and Fidelity have investments in overseas markets, although these are not feeder products.

Among the more recent funds that have been similarly conceived is Tata Global Infrastructure, a three-year close-ended vehicle that can invest up to 35 per cent in companies listed overseas. It will have a customised index: BSE Sensex for 65 per cent of the portfolio and MSCI World Index for the rest.

Incidentally, Franklin Templeton has worked out a separate fund for investing, inter alia, in Asian markets, while Birla Sun Life has proposed to allocate partially to global equities. Sundaram MF has planned a product partly for investing in units of overseas funds (and exchange-traded funds). BNP Paribas Asset Management will be the investment advisor for international exposure.

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