The Hindu Business Line : Principal MF scheme to diversify global investments

Boost to investors
The fund will provide a "good diversification" opportunity for the domestic investors into the other global equity markets.
Currently, 35 per cent of the corpus of the Global Opportunities Fund is invested in Europe-listed companies, another 35 per cent in the US markets and the remaining in the Asian region.

Mumbai , March 11

The `Global Opportunities Fund' of Principal Mutual Fund, perhaps the only mutual fund scheme in the country that currently invests in overseas stock markets, is set to diversify its equity investments to blue-chip MNC stocks following the easing of norms in the Union Budget.

The performance of the Global Opportunities Fund, launched in early 2004, had been affected on account of redemption pressure from investors who preferred to invest in the Indian equity markets, which have been on a bull run in the last couple of years.

"We will approach the SEBI for permission that would allow the Global Opportunities Fund to diversify into other stocks in international stock markets," Mr Sanjay Sachdev, Managing Director and Chief Executive Officer of Principal PNB Asset Management Company Pvt Ltd, told Business Line.

Under the existing provision, domestic fund houses can invest only in foreign listed companies that hold a minimum of 10 per cent in a listed Indian company.

From an assets under management (AUM) of Rs 70-odd crore in 2004, the Global Opportunities Fund's AUM has dwindled to Rs 4.22 crore at the end of February 2006, as per the Association of Mutual Funds in India figures.

With the Indian stock markets "peaking out", Mr Sachdev said the fund will provide a "good diversification" opportunity for the domestic investors into the other global equity markets.

The existing scheme was handicapped by the restriction on Indian exposure by foreign listed entities, he said. The Indian fund houses' investment universe is restricted to just about 30-35 MNC stocks under this provision.

In the Budget for 2006-07, the Finance Minister, Mr P. Chidambaram, has done away with this restriction.

No new scheme planned

Mr Sachdev said the Principal Mutual Fund has decided not to come out with a new scheme to tap the new opportunity arising from the Budget.

Instead, the existing scheme will be altered to suit the new provision. "We have to get the SEBI approval before starting investing in other (overseas listed) companies," he said.

Currently, 35 per cent of the corpus of the Global Opportunities Fund is invested in Europe-listed companies, another 35 per cent in the US markets and the remaining in the Asian region.

When the fund was launched in 2004, it was hailed as a major step towards integrating Indian investors into the global economy by helping them invest in international stock markets.

The scheme has the benefit of risk diversification across geographies as it invests money across key regions such as the US, Western Europe and the Pacific Rim.

However, restrictions such as Indian exposure by foreign entities ensured that only Principal Mutual tapped the "opportunity."