Recently, Principal Asset Management Company launched its Global Opportunities Fund, which got a reasonably good response garnering around Rs 60 crore (Rs 600 million).
The proceeds of the issue will be deployed in investing in the scrips of those companies abroad which have a listed subsidiary in India and in which the parent company holds at least a 10 per cent stake.
Investors putting money into this scheme will be able to participate in the global markets and in fairly blue chip scrips without having to move a finger.
The mutual fund plans to invest in stocks of companies from the United States, Japan and Europe and right now the selection will be restricted to around 50 stocks.
Incidentally, Principal is the first and only fund house to offer such a scheme in India after the government relaxed restrictions on investments abroad.
Other fund houses are still hesitant about it, as they feel that the investment universe being so restricted they may not be able to justify putting investors money into it. The rise in the rupee vis a vis the dollar is also an area for concern as it means that returns will be lower.
Interestingly the fund will open for repurchase from April 12, 2004 and so investors who did not invest in the initial public offering can take their chance with it.
However, as in all cases, investments should be made only after doing a lot of due diligence.
The advantages in investing in the scheme is as already pointed out, access to good quality stock as well as an opportunity to participate in the growth of the economies of the more advanced countries. You can hold, by proxy, shares of companies such as Unilever, Novartis, Nestle, Asahi Glass, Suzuki among others.
Japan, after more than a decade of stagnation, is back on the growth path and stock prices have already jumped up in anticipation of a good economic growth after years of being moribund.
However in the US markets there has been a good deal of volatility in the prices and in fact the index has gone up substantially, so investors who want to invest in the units of the scheme at this stage should weigh the opportunities in upsides and downsides before taking a decision.
The general consensus among market watchers is that since valuations have already run up quite a bit it would be wise to let it cool down before taking an investment decision.
In order to maximise their gains through investment in this scheme, what investors should do is to stay invested for a long time.
Once the elections in the US are over in November this year, there are indications that the interest rates will rise and then there could be a shift in the foreign investors money from emerging markets such as India to the US at least. The best way to get the most from your returns would be to be a long-term investor. Then the gains will surely come.
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