Going Across The Borders

Deutsche AMC has come up with an FOF that will invest in overseas’ mutual funds
Objective: It (feeder) is an open-ended equity FOF scheme that will predominantly invest in the units of Luxembourg based-DWS Invest Global Agribusiness Fund (master fund) and other overseas mutual funds that are focusing on agriculture.
Strategy: The master fund is betting on the rising global population and increasing urbanisation that is putting pressure on the earth’s limited natural resources. It focuses largely on equity investments in companies engaged in agriculture and its allied activates across the world. However, at the end of February 2010, stocks from the USA almost contributed up to over 31 per cent of the portfolio, while other countries’ contribution remained in single digit. Talking about the sectoral allocation, stocks from agricultural products and fertilisers and agrichemicals formed for almost 45 per cent of the portfolio. All these results in a slightly higher risk arising out of the country specific risk and sectoral over-dependence.
Fund Manager & AMC Performance Kumaresh Ramakrishnan will manage the investment in the foreign securities, while Aniket Inamdar will manage the investment in the Indian markets. Performance of most of the funds man-aged by these two fund managers hasn’t been in line with the category.
Suitability & Recommendation: The master fund’s performance has been quite consistent over the years, beating its benchmark MSCI World in one and three-year period by a massive 2,662 and 825 basis points respectively. However, if one is chasing higher returns than we would rather recommend investing in domestic funds, as India being a developing economy offers far more opportunities for capital appreciation than the developed economies, where this fund is primarily invested. Though this fund’s investment theme seems to be good and unique, high risk investors who want to diversify the portfolio across countries can take limited exposure to this fund.