DHFL Pramerica Global Equity Opportunities: Another fund for global equity exposure

The fund-of-fund can take up to 100% exposure in global stocks across countries and sectors

Of late, a few mutual funds have latched on to investing in global stocks. The trigger seems to be the good run being enjoyed by some global equity indices in contrast to the weakness in the Indian stock market.

In September, for instance, Axis Mutual Fund launched Axis Growth Opportunities Fund that will invest up to 35 per cent of its corpus in foreign securities.

And in October, DHFL Pramerica Mutual Fund did a fund rejig to offer investors broader global equity exposure. The fund house changed the name of DHFL Pramerica Global Agribusiness Offshore Fund to DHFL Pramerica Global Equity Opportunities Fund.

Broad range

Along with the name, the investment mandate also changed. Unlike earlier, when the fund was thematic andlargely invested in global agriculture-related stocks, DHFL Pramerica Global Equity Opportunities is a diversified fund that seeks exposure to promising global stocks across countries and sectors.

In being region- and sector-agnostic, DHFL’s new fund is different from many other India-based global-focussed schemes that are often theme-based or region-specific.

DHFL Pramerica Global Equity Opportunities is a fund-of-fund. It invests in PGIM Jennison Global Equity Opportunities Fund that has a strong track record since its inception in April 2011. Its annualised returns in US dollar terms is 12.4 per cent since-inception, 10.2 per cent over five years, 11.4 per cent over three years and 3.2 per cent over a year. This is 5-7 percentage points higher than the returns of its benchmark, MSCI All Country World Index.

In rupee terms, the fund’s annualised returns will be higher, thanks to the steady depreciation of the rupee against the US dollar over the years. DHFL Pramerica Global Equity Opportunities does not hedge against currency movements; thus, any depreciation of the rupee vis-à-vis the dollar will benefit Indian investors while any appreciation in the rupee will hurt returns.

The portfolio of the underlying fund (PGIM Jennison Global Equity Opportunities) contains 35-45 stocks including known global names such as Amazon, Netflix, UnitedHealth, Tencent, Boeing, Louis Vuitton, Nike, Mastercard, Facebook and Ferrari.

IT companies have the largest share of the portfolio (about 28 per cent as of September end), followed by consumer discretionary, healthcare and communication services. In terms of geographical spread of the corpus, the US has the largest share (about 57 per cent as of September end), followed by Europe (about 24 per cent) and China (12 per cent); India accounts for about 2 per cent. The fund, with a corpus of about $160 million, remains nearly fully invested in equity; cash holdings are at less than 5 per cent.

The expense ratio of DHFL Pramerica Global Equity Opportunities is 2.5 per cent for regular plans and 1.85 per cent for direct plans; this includes the expense ratio (0.9 per cent) of the underlying fund (PGIM Jennison Global Equity Opportunities).

Gains on sale of units of DHFL Pramerica Global Equity Opportunities will be taxed similar to non-equity funds — gains on units held for more than 36 months will be considered long-term and taxed at 20 per cent with indexation, while short-term gains will be taxed at investors’ slab rates.

Takeaway

If the underlying fund (PGIM Jennison Global Equity Opportunities) continues its good past show, DHFL Pramerica Global Equity Opportunities can be a worthwhile choice for those seeking global diversification, dollar exposure, and investment in themes and stocks not available in India.

Whether it can make its presence felt among the 40-odd India funds that offer international exposure needs to be seen. The competition includes funds with strong track records, such as ICICI Prudential US Bluechip Equity and Franklin India Feeder - Franklin US Opportunities.

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