The Hindu Business Line : Domestic fund houses looking at Asian markets

Domestic fund houses seem to be celebrating Independence Day in a rather special way – they are increasingly bringing out new products for markets other than just India. At least six leading players in the asset management fraternity have lined up funds that will allocate to stocks from countries in Asia and elsewhere.

Last week, HDFC MF and Standard Chartered MF joined the ranks of ICICI Prudential and Franklin Templeton by filing offer documents for equity funds aimed at Asian markets. HDFC IndAsia Opportunities Fund and Standard Chartered Asian Prosperity Fund, as the products have been named, will aim at generating long-term capital appreciation from diversified portfolios.

Trend gathering steam

The trend, as Mr A.P. Kurian, Chairman, Association of Mutual Funds in India (AMFI), sees it, may well gather steam in the days ahead. “The current set of regulations, coupled with greater demand for international products, has prompted funds to explore opportunities in other markets,” he noted.

The current flurry of activity surrounding global funds will add to what has been started by players such as Principal, Franklin Templeton and Fidelity. In recent times, the likes of Birla Sun Life and Tata have done their bit by mooting funds for international markets. ABN Amro MF too, has proposed to launch what it had named a ‘Chindia’ fund.

Geographical diversification

Investors, said Mr Nimesh Shah, the new MD of ICICI Prudential MF, need to look at options that help reduce their dependence on just one country or one region. “Geographical diversification is necessary,” he said with reference to a fund proposed by ICICI Pru.

The proposed HDFC fund, which will have a customised benchmark comprising BSE 200 for 65 per cent of the portfolio and MSCI Asia (ex-Japan) for the remaining portion, will have Standard Life Investment of the UK as the investment advisor for the allocations that may be made to foreign securities.

This entity, the offer document has mentioned, is the investment management company in the Standard Life group.

Its global assets under management stand at roughly $269 billion as on March 2007.

The StanChart MF product will try to secure long-term gains from a portfolio of mainly equity and equity-related instruments (including derivatives) issued by Indian and other Asian companies. The fund may invest more than 65 per cent on an average of its net assets in equity shares of domestic companies.

The rest may be put in foreign securities, including overseas mutual funds.

The fund, the offer document has maintained, will have the right to invest the entire balance amount in one or more overseas mutual funds, such as UBS (Lux) Institutional Sicav Asian Consumption Fund, in line with the investment objective.

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