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00:00Hello and welcome. You are watching NDTV Profit and over the next half an hour we will
00:10talk about everything that is exciting in the mutual fund universe. Of course, the market
00:15is having a quiet afternoon. It is not looking too great for the street. The breath is also
00:18fairly weak, but let us go into some more interesting stuff which is what you should
00:22be doing with your money and your portfolio. These are tough times to navigate and with
00:26all that talk about global markets outperforming India, the question to ask is should you be
00:31adding allocations to other geographies. Rishabh Desai, Founder, Rupee with Rishabh and Nisreen
00:38Mamaji, Founder and CEO of MoneyWorks both join in. Thank you very much for joining us
00:43both of you. Rishabh will take start by asking you this. When one is building a portfolio,
00:50we constantly and often talk about the importance of diversification. We also talk about the
00:55importance of not over diversifying your portfolio. What I do want to ask you is how
01:00important is it for somebody in a wealth building stage to have geographical diversification
01:06on their portfolio? Hi, first of all, thanks so much for having me on the show. This is
01:13a very important question which you just asked and a lot of people today are concentrating
01:18on India, which it is very much rightly so as India is growing at a substantial growth
01:25rate and it's the fastest growing economy, emerging economy globally. But at the same
01:30time, let's not forget that, you know, other economies have also delivered substantial
01:37returns and growth. For example, like the U.S. over the last 10 years, if you compare
01:44it with India, U.S. has actually outperformed. Right. So also U.S. has a lot of other benefits
01:50like because the companies are giant, they have global presence. You know, we are communicating
01:55via Zoom, which is a U.S. owned company. So I feel that geographical diversification,
02:01especially in the U.S. economy, is utmost important. Apart from all of this, you know,
02:06the currency is also very strong and currency appreciation also plays a very important role.
02:11So I feel, you know, having some exposure, especially in the U.S. markets, anywhere between
02:16the probably 5 to 20 percent is utmost important today.
02:20Right. Nisreen, what are your thoughts? Right. I mean, all of us who live in India have a
02:26home bias and for obvious reasons, any investor is and has a home bias because this is the
02:32only market we truly know. In your opinion, how important is it to diversify your portfolio
02:39across geographies? So, yeah, as you rightly said, there is a
02:44home bias, but it's very important not only to have the geographical diversification,
02:49but also certain industries, you know, are not represented in India as yet or, you know,
02:55we are not completely, you know, in the space, let's say for digital especially. I'd like
03:00to draw an example. Investors can now invest in certain international funds. I'm talking
03:06about the Nepal, India, Taiwan fund, the Nepal, India, Japan fund, the Hang Seng fund, which
03:11had closed down subscriptions, you know, until October 15th, 2024. On Feb 2nd, 2022, we were
03:18not taking any more subscriptions via lump sum, switches, SIPs or STPs into these funds.
03:26But typically, you know, I'd like to draw your attention to the Nepal, India, Taiwan
03:29fund. It's an active equity fund and it enables investors to diversify and to select Taiwan
03:35based stocks, such as the semiconductor giant, Taiwan Semiconductor Manufacturing Company,
03:41which has the highest weightage of 8.2% in the fund. The top three stocks are, you know,
03:47in the technology space with a combined weightage of about 20.35%, which are Taiwan Semiconducting
03:53Manufacturing, Asia Vital Components, and Genseng Precision.
03:56Nisreen, we'll talk about the funds in a minute. I just want to help our viewers understand
04:01the importance of this, right? Products apart, I think at a portfolio level, we need to get
04:05a better understanding. Rishabh, I'm going to come back to you for this. We all in some
04:09way or form have a global exposure, be it travel, be it families who want their kids
04:14to go study abroad. Of course, the wealthy also have one leg outside in most cases. The
04:19reason I ask you this is because while we have an expense side to global markets, we
04:25don't often have an investment side. Also because the government of India has not made
04:29that very easy with LRS, right? So the usual understanding is that if I want to invest
04:34in the US, I need to use my LRS. But that's not completely true, right, Rishabh, because
04:39there are other ways to do the same thing without actually exhausting your NRS limit.
04:45Absolutely, I completely agree with you. Gone are the days where the rich and wealthy and
04:50the ultra rich could invest abroad. Even now today, you know, with a simple product like
04:56mutual fund, you can invest, a retail investor can take global exposure and invest abroad
05:02through Indian AMCs, right? Unfortunately, what is happening right now is that, you know,
05:08the Reserve Bank of India has restricted, you know, investing in, you know, in the offshore
05:16market because there is a seven billion US dollar limit. And it rightly so because the
05:22Reserve Bank of India wants to protect the Indian currency and the Indian Indian growth.
05:26But at the same time, I think, you know, today we are living in a very globalized,
05:31interconnected world. And with a click of a button, you can actually see the markets,
05:36how they are panning out abroad and make quick decisions of how to invest, when to invest.
05:42So I truly feel that, you know, apart from the LRS route, I think with a click of a button,
05:49if Reserve Bank of India further increases the limit, you know, I think there will be more
05:56flows because now, if you observe pre-COVID, pre-2020, there was not a lot of awareness,
06:03you know, how one should invest globally, you know, what products. Now, there are so many
06:07different products, both on the active and on the passive side. So I think today, rather than
06:12looking anywhere else, I think mutual funds is a one stop destination for everything, whether it
06:17is equity, fixed income, commodities, or even offshore investments taking global exposure today.
06:23You're so right, Rishabh, because the world has come a long way. I mean, when we open the markets
06:27every morning, the first check we do is how Isha is doing and how the US handover has been. So
06:33all that talk about deleveraging or decoupling hasn't played out. But Rishabh, on that note as
06:40well, my next question to you is what is the ideal allocation one should be making to global funds
06:47in a portfolio for an individual who's got an average risk profile, but looking at wealth
06:52creation? If someone, okay, first of all, see, there are many geographies where mutual funds
06:59and companies invest today. Okay. You know, there is the China market, the greater China market,
07:06which combines, you know, China, Hong Kong, and Taiwan. There is a European market, there is a,
07:11you know, the Asian market, there is, of course, the US market. So now,
07:15mutual funds do invest in a lot of different geographies. And there are products,
07:19you know, like global funds, which invest in a combination of these geographies together.
07:25Now, to put it very simply, and to answer your question very clearly,
07:29the average risk taker should only concentrate on the US economy. There are three typical reasons
07:35why. See, one is the US is the largest economy today. Let's not forget that. Second is that
07:41US is a very consistent growing economy as well. And third is that, you know, US as markets and
07:49companies and as economy is very transparent also. See, today, if you see that greater China
07:53in the China region, it's not unfortunately not very transparent. So you actually don't know what's
07:58happening in their economy. Although, of course, they do put out data, but again, it's not a full
08:03democratic country. So it's very difficult to, you know, predict what their government policies
08:08would be or what their company or what their growth trajectory would be, right? So I think if
08:13someone wants to take a global exposure at this point of time, although, see, I feel there is
08:19tremendous upside opportunity in the greater China region. But there are and of course, the Chinese
08:25government has given a good stimulus packet. But today, you know, that that rally is short-lived,
08:32and we still have a long road ahead to see the China markets in the recovery phase itself. Forget
08:40entering into a bull market. So at this point of time today, I think if someone wants to take
08:44global exposure, there is only one economy what I can think of is the US economy.
08:49So right, because everything else in Asia right now seems very tactical, right? And it's so tough
08:53to understand the dynamics that happen in those markets. Nisreen, in your opinion, what is the
08:59ideal allocation to global funds one should be looking at at a portfolio level? So I think we
09:05shouldn't go beyond, you know, 10 to 15% in the portfolio, as you mentioned, for an average,
09:10you know, risk taker, because, you know, Ruchip has already mentioned some of the points. But
09:15having said that, if you have certain goals of say, sending your child for a foreign education,
09:20and you want to lock in the dollar at the current rates, so in those cases, definitely,
09:24we do suggest a higher allocation. Because, you know, in say 10 to 15 years down the line,
09:29you are planning to send your child to university, perhaps in North America or in Europe.
09:35So, you know, if you have a specific goal in mind, and you have, say, 30% of your portfolio or your
09:39SIPs working towards that goal, then yes, definitely, it makes sense to have higher allocations.
09:45So on a case to case basis, you know, the decision would be obviously different. But by and large,
09:51I think don't go beyond 10 to 15% of your portfolio, for an average risk taker in any
09:56equity, in any international fund, whether it's Asia or the US.
10:02Right. Ruchip, you know, nowadays, a lot of retail investors do understand and believe that
10:07they have a good understanding of tech stocks, for example, on emerging themes in the US, right.
10:15And I know this has also become quite easy, because there are so many platforms now that
10:19make it very accessible to go out and buy an NVIDIA, for example. What do you recommend? Do
10:24you feel like allocations to global markets should be made directly? Or is it always better
10:31to do it through a fund or a local fund manager? See, I would always go via the index fund route,
10:39actually, it's very simple to track, or very simple to invest, right, and very simple to
10:44monitor also, because you don't know what's happening in their economy. And a retail investor
10:50may not understand all the nitty gritties, you know, the technicalities of their economy. Although
10:55we all understand, and the retail investors today have become definitely become smarter,
11:00and we all understand how the markets function, you know, as how we see, you know, they are
11:06NAV, especially the S&P 500, NASDAQ 100. But I would still stick with simple, plain vanilla index
11:13funds like S&P 500 and NASDAQ 100. If you see, actually, when the markets, when the US markets
11:19fell after COVID, it has rallied substantially, you know, so you can actually track and monitor
11:27it in a much more easier way. If you fall into this cherry picking of a particular stock, you
11:33know, you may end up buying a wrong stock at the wrong time also. So that's a very big risk what
11:39a retail investor is actually taking. So rather than going into the direct stock route, I would
11:44suggest a plain vanilla S&P 500 and NASDAQ 100. Also, one more additional point I would like to
11:51add since, you know, see the US economy and the US growth is struggling, and the US Fed is doing
11:57everything it can by cutting rates and pumping more liquidity to make sure that the growth comes
12:02back in action. I truly feel during this rate cut phase, you know, the tech stocks, so especially
12:07NASDAQ 100 can do well. So I see a good upside opportunity in NASDAQ 100. But keeping that in
12:14mind, you know, the valuation still remain very expensive. So I think an SIP methodology would
12:18work great today. That's such a good point to make. Passive investing is probably, you know,
12:25very underrated and not usually sold because I guess distributors don't make too much money on it,
12:29but may just be the right way to create significant long term wealth. Naseem,
12:33you want to have a go at this. There are a few active funds that have now of course started
12:38taking allocations. In your opinion, what is the best way to play a global allocation? Do you do it
12:44through passive ETFs, invest them in a staggered manner, be disciplined about it? Or would you go
12:50and invest into active funds playing these specific geographies? See, a lot of these funds
12:56are also, you know, fund of funds, which are feeding into the international funds. So what
13:01is available in India today, you know, you can have the ETF options or you can go in for a fund
13:07of funds, which is particularly, you know, investing in an ETF or an index. So that would
13:11make a lot of sense. I think for, you know, Indian investor, as rightly mentioned earlier by Rishabh
13:18also, a disciplined fashion to go in with an SIP would be a very good way to go about it. But,
13:24you know, don't allocate too much on the international funds because, you know, we do
13:30have a lot of investors, in fact, NRI investors investing into the Indian markets and also, you
13:35know, undertaking the currency risk, even after subtracting that, you still will make a lot of
13:40money in India. So, you know, 80 to 85 percent of the portfolio should be have a home buyers,
13:4510 to 15 percent you can invest into an index fund or a FOF rather than buying direct equity
13:52and going through the LRS route, etc. A mutual fund is a completely holistic, you know, product
13:58that can give you a lot of ease and convenience of investing in the international markets
14:03through, you know, an index fund or a fund of funds and also select a FOF, which is available
14:09over here, which is a feeder fund into any of the international markets, whether it is in Asia or
14:14the US. Now, Rishabh has already mentioned how he prefers the US equity as opposed to any of the
14:19other emerging market or Asian markets. Nisreen, what are your thoughts? Are you recommending to
14:24your clients to add a little bit to the Japan, Chinese or the Taiwanese market? And the reason
14:29I ask this, because while it may not be strategic, a tactical allocation could be warranted, you
14:35think? Definitely. Like I said earlier, there is a, you know, particularly there's a Nippon India
14:41Taiwan fund, which, you know, doesn't these sort of industries are not very well developed in our
14:48country, like the semiconductor, you know, the space, as well as, as I said earlier, the Asia
14:54vital components, this precision industrial. So, you know, two, three of these companies are about
14:5920.35% of the fund. So if we are anyway looking at, you know, this particular sector doing very
15:07well internationally, as well as within our country, and we don't have exposure to these particular
15:12industries within our country, then we should be looking at it. We also have the Nippon India Japan
15:17fund, which has an equity fund, which is an actively managed fund. It has the top Japanese
15:22companies like, you know, Daikin, Hitachi and Tokyo Electron. So unlike its tech-heavy Taiwanese
15:30counterpart, which is the Taiwan fund, the Japan equity fund is tilted more towards, you know,
15:35consumer cyclical. So you're getting a very different flavor with the Japan fund. Earlier in
15:40the month, mutual fund investors were lured into the China-based mutual funds as well, following
15:45the nation's largest economic measures. So investors can now look into the Nippon India Japan
15:51or the Taiwan fund, as well as other Asian equities. We also have the Hang Seng and
15:56Bees fund of Nippon, which is an ETF. And basically, it also corresponds to the total
16:01returns of the securities as represented by the Hang Seng index. So these are a few of the funds
16:07that, you know, we should be looking at. We also have the Nippon India U.S. Equity Opportunities
16:11Fund. And this will provide you long-term capital appreciation by primarily investing in equity and
16:17equity-related securities of companies which are listed on the recognized stock exchanges in the
16:23U.S. And the secondary objective is to generate consistent returns by investing debt and money
16:29market within the country itself, that is within India. So you're getting, you know, exposure to
16:34four or five different geographies and certain industries which are not yet developed in our
16:40country. So definitely for diversification purposes, you can look at any of these actively
16:45managed funds. Rishabh, your bias clearly is more strategic, right? So you're not going to play the
16:51tactical game, which I guess for long-term investors is very important, because while
16:56taking a call on a geography on the tactical nature is always hard because you've got to take
17:01two calls. One is entry and the other being exit. But just elaborate on that. There is the Mirai
17:06Asset NYSE FANC ETF, right? The reason I ask you this is because a lot of the themes, you know, a
17:13lot of the companies that are pretty big in the semiconductor tech space are also listed on the
17:17New York Stock Exchange or listed on Wall Street. Do you feel like that gives you a lot more comfort
17:22to buy into stocks through a fund which is focused on U.S. equities or U.S. listed companies? So it
17:29gives you an indirect, sort of indirect exposure to the big stories in Asia.
17:37The FANC plus index consists of, you know, the 10 global innovation companies, right?
17:45And more or less, these companies are covered either in NASDAQ 100 or, you know, and or the S&P
17:52500. It's only the FANC plus index is a very concentrated index. And, you know, Mirai Asset
18:01has managed it very beautifully. Well, actually, see, at one point of time, you know, the FANC plus
18:09index did have good amount of exposure in the greater China region. OK, so one needs to be
18:16very cautious and understand the product thoroughly. Well, see, this index is going to
18:21consist not only of the U.S. economy, but certain global economies and the China market as well.
18:27See, China market functions in a very different way. It's not only volatile, but it's going to
18:32be super cyclical also. So I feel, see, rather than although although I'm a I'm a big fan of
18:39the FANC plus index, you know, I like to mitigate the risk in a much more better way. So if someone
18:45at this point of time is taking exposure in the U.S. economy, stick with the U.S. economy,
18:49which is the S&P 500, NASDAQ 100 index funds or the FOF. Number two, if someone is in want to
18:56invest as a tactical allocation in the China or the greater China region, you know, rather than
19:02going for these different different funds, which is the Nippon and the Hang Seng, Japan, Taiwan,
19:06this is a beautiful product called Edelweiss Greater China Offshore Fund. So Greater China
19:12Offshore Fund is the underlying instrument is is the JP Morgans of Greater China Offshore Fund.
19:18It's beautifully managed and it and it consists of three economies, which is the Taiwan region,
19:24the China region and the Hong Kong region as well. So, you know, keep it keep your portfolios very
19:30simple because we have seen clients and investors having a lot of products and falling into a
19:35tremendous amount of mess. A U.S. it's NASDAQ 100 and S&P 500. If someone wants to take a greater
19:41China exposure than a greater than Edelweiss Greater China Offshore Fund would would work
19:47best. But let's not forget one more thing is that the China economy has a long road ahead.
19:53You know, we have just seen some 30, 35 percent or 40 percent of the upside, but we still have
19:59a very long, probably another 40, 50 percent of upside just just for the recovery stage itself,
20:05you know. So at this point of time, I feel, you know, till the time there is some consistency
20:11and upside opportunity and macroeconomical stability in the China region, I wouldn't put in
20:16a lot of money in the in the greater China region. I'm more comfortable putting in money
20:22in the U.S. economy. But although the existing investors may have invested in the greater China
20:28region and sometime back, we also had recommended investing in the greater China region. They can
20:32stay invested the way it is because I do see with the reason with the cheap valuations what
20:37the greater China region has to offer. There can be a lot of upside opportunity, but
20:41it will take some time. Yeah. And these Chinese and Hong Kong,
20:47you know, exchanges or the stocks act like broader market counters. I mean, there are days Hong Kong
20:52is on 5 percent and China is up 10 percent and, you know, it gives up 15 percent. I mean,
20:57add so much volatility to the portfolio, I would imagine. And Nisreen, in fact, just to quickly
21:03make a note, the Edelweiss Greater China Equity Fund has also done pretty well in terms of returns.
21:08The one month return is 3 percent or three months. It's done 14 percent in one year. It's
21:12upward of 20 percent. So it's actually had a good run stable in that sense in the last one year.
21:18Nisreen, very simple question. If you want to take advantage of a currency, which is our local
21:23currency depreciating, would investing in fund of fund with a global allocation be a good idea?
21:30Could that help you make money when the local currency is declining against the dollar, say?
21:36So definitely, I mean, you know, you have to hedge the currency at every point of time.
21:41So you should be investing in the U.S. dollars. You know, you can also look at a multi-currency,
21:47a multi-asset fund, which is an alternative. It would include gold as well as some amount
21:52of international equity. So I think, you know, that would be a very beautiful product to enter
21:57into. It has equity. It would have fixed income. It would have gold as well as international equity.
22:03So that is a product that, you know, you can use for your hedging purposes because obviously,
22:08you're also looking at, you know, the rupee depreciating at any point of time and also
22:11earning through the currency appreciation in any dollar fund that you would have.
22:15So rather than taking an individual bet, because it's really difficult for a retail investor to
22:20do that, I think we can leave it to the fund manager by having a by investing in a multi-asset
22:26fund and having exposure to, you know, these various equity and debt classes as well as
22:32which includes international equity. And I think, you know, the retail investor should have a longer
22:38term holding, you know, view, not a tactical, you know, view just for two, three months because
22:43some of the funds we've discussed have, you know, shorter term, very good, you know, returns. But
22:48in the last three years, they've been languishing, especially the China funds. So, you know, if you
22:53are a long-term investor, you have a longer term view, then definitely, you know, you should be
22:59investing in a product which has various asset classes and don't take a view for a particular
23:05asset class like, you know, only an international equity or only betting on the US dollar. So keep
23:10in mind all these factors, especially because, you know, your staking ability will be average.
23:16Rishabh, we've got only about a minute to go, but two things that I want you to highlight for
23:19our viewers. So if there is an interest and if there is individuals who want to add on to some
23:24of these, you've obviously talked about the best way to do this is ETF, which is also low cost.
23:29But if one wants to look at a fund-to-fund, quick word on expense ratio, because these aren't cheap
23:35investments, and also lock-ins. Is that something one needs to be concerned about while you make
23:39that investment in these, even if your time horizon is long term? Usually, there will be no
23:45lock-ins unless and until someone pulls out the money before one year, there can be a 1%
23:51exit load from the AMC. I think even fund-off funds would be very cheap in terms of expense ratio
23:58compared to the other active funds. So I would still prefer going into the passive route because
24:05number one, it's easy to track and monitor. And number two, they relatively do have a lower
24:10expense ratio, even the FOF products, because the FOFs ultimately will invest in foreign ETFs.
24:16So technically speaking, you know, it will be lower, the expense ratio will be lower compared to
24:21the active side. Just one more point I wanted to add is that, you know, investors can also
24:27look at, you know, Indian mutual funds, say like Parag Parekh FlexiCap or SPI Focus Funds, because
24:33they do invest abroad in the US economy as well, you know. I mean, initially Parag Parekh
24:39invested around, say, close to 30% in the US economy, which is big because of the restrictions,
24:44they had to drop down their allocation to probably 17-18%. So if, you know, someone doesn't
24:50want to take a separate exposure altogether in the US economy, I think going into the
24:56mix of Indian and foreign equities via the Indian mutual fund, which is Parag Parekh FlexiCap,
25:03what we recommend to our clients, and the SPI Focus Fund, I think they would be very well sorted.
25:08I'm so glad you made this easier for us, Rishabh, because everyone suddenly is getting so excited
25:13and talking about allocations to Hong Kong, allocations to China, just because foreigners
25:18seem to be driving some of the liquidity there. But what we also understand from them, and I think
25:23that could be food for thought, is it's not a part of India that's going away to China,
25:27it's actually European money that's going into China at this stage. But great talking to you,
25:31thank you for building that perspective. The best way to do this is, yes, you need geographical
25:35allocation, but you don't need to go overboard. The easier, cost-effective strategy to adopt
25:41is to do it through passive investing. US is a preferred market because there's transparency,
25:46markets like China, it's very tough to know what's going on. The bias should remain to
25:50Indian markets, and funds like Parag Parikh, which do make that allocation to global equities,
25:55have been phenomenal performers. So you may not even need a fund to fund,
25:59Parag Parikh in its own worth can actually play a good role for your portfolio. With that,
26:04we're completely out of time. Thank you for watching. There's a lot more programming on
26:07the other side, so keep it with us.
26:20Transcribed by https://otter.ai