Exploring global mutual funds as a diversification tool for your portfolio - Kotak Bank
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31 JANUARY, 2023

It’s been a roller-coaster ride for stock markets globally since the start of the pandemic. Major stock markets across the world saw a sharp correction in March 2020, however since then markets across the world have recovered smartly.

At times like these, one often thinks if it is better to diversify your portfolio into other countries and not place all your eggs in one basket. Now, make no mistake, we are not asking you to shift all your investments out of India. But depending on your risk profile, a certain percentage of investment in markets abroad is a good move to make.

US products continue to rule

Consider this: Whether the market is up or down, will you use Facebook, Instagram and WhatsApp? Will you search for stuff that you want on Google? Once the lockdown lifts and life returns to normal, will you start using Amazon for home delivery? Will you use Zoom for virtual meetings? Will you use Microsoft products? Will you buy iPhones and Dell Computers powered by Intel technology? Will you party more at home and drink a Coke or a Pepsi? Will you watch more Netflix and Disney (via Hotstar)? If the answer to most of the above questions was yes, then it is logical that consumption of products belonging to these companies will see a rise, worldwide. It therefore becomes more logical for you to consider these companies for investment. You can do that by putting your money into funds that focus on the US market.

Innovation is the name of the game

When it comes to innovation, the United States is ranked second on the Innovation Index (large countries) next only to South Korea. The Teslas, Facebooks and Apples of the world have their home in the USA. Ironic as it may sound, innovation often explodes during times of crisis. Google shone through the 2000 dot com bust and WhatsApp was launched in the wake of the 2008 financial crisis. While India has a brilliant consumption story, it lags when it comes to high-end technology and engineering.

Winners keep rotating

Nothing illustrates the need to diversify more than a look at returns across countries over the past 11 years.  The study reveals that India outperformed global markets for four years and the USA did it for six years.  Which goes to show, why invest in one winner when you get the benefit of two? If you look at the NASDAQ100, you will find that the Index has a relatively lower correlation with Indian indices. It provides a perfect diversification opportunity.

India’s currency depreciation

Right now, we can agree that we are in a situation where the Indian rupee may depreciate constantly. This does not mean that you can’t take advantage of it.

Take for example, if you invest Rs. 75,000 in a US-focused mutual fund, i.e. $1,000, the fund delivers zero returns for three years, but the rupee has continued to depreciate and the value is now at Rs. 80,000.

The value of your investment just went up by Rs. 5,000! Hence diversifying your funds into global markets helps you take advantage of such currency fluctuations.

Our view

When you have holdings in both Indian and US markets, you are running on two very strong engines. Global Funds are long-term investment instruments that may yield returns over a 5 to 10 year window. Therefore, these are not funds recommended for those new in investing. Ideally, investors already owning a broad portfolio in the domestic market should look to expand their opportunities through a Global Fund. While the risk on these funds is relatively higher than domestic funds, the returns can also be proportionate. However, keeping in mind the value variation that can occur in the short to medium-term, investors should ideally have no more than 10-15% of their equity investments in this category to reap sufficient rewards without undue risk to the portfolio. 

Check out Kotak’s currently recommended International Funds below:

Fund Name Min SIP Amount (₹) Launch Date 1 year 3 years 5 years

Franklin India Feeder - Franklin U.S. Opportunities Fund






Invesco Global Consumer Trends^

(Invesco India - Invesco Global Consumer Trends FoF)






Wellington Global Innovation Fund^

(Kotak Global Innovation Fund of Fund)






Source: MFI Explorer | Data as on 31 Jan 2023 | ^Underlying fund returns are calculated by converting USD to INR using RBI reference rates | *Underlying fund’s launch date


Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.