Thomas Friedman has achieved immortality through the phrase, “The world is not flat,” which he borrowed from Nandan Nilekani.
MUMBAI: Thomas Friedman has achieved immortality through the phrase, “The world is not flat,” which he borrowed from Nandan Nilekani. However, a little digging will tell us the world is a lot less globalised than some people make it out to be.
Take investment. Investors across the world prefer to invest in the stock market of their own country even when they know that markets elsewhere are offering higher returns and that such investment would allow them to diversify some amount of risk. This phenomenon is referred to as the home bias and has been a major puzzle for researchers in international finance.
It is this bias some mutual funds in India would like the Indian investors to shed and invest in schemes that invest abroad.
The latest mutual fund scheme to join this bandwagon is the Kotak Indo World Infrastructure Fund, a three-year, closed-ended equity scheme that plans to invest in Indian and international infrastructure stocks.
Sandesh Kirkire, chief executive officer of Kotak Mutual Fund said, “We believe infrastructure is a multi-year theme and this scheme offers an excellent investment avenue for long-term investors looking to gain stable returns from exposure to companies likely to benefit from infrastructure investments in India and rest of the world.”
The scheme will invest 65-90% of its money in domestic infrastructure stocks and 10-35% in international infrastructure stocks. The international investment will be carried out through T Rowe Price.
Let us ask two salient questions that we have always said one should ask before investing in any scheme:
a) How different is the scheme from those already on offer in the market, and
b) How have other equity schemes of the mutual fund performed?
On the first count, there are many infrastructure schemes already in the market, which have performed really well. However, they invest largely in the Indian market.
This scheme is different in that it has an international component as well, though how well the international portion performs is the question to ask.
Will it generate returns similar to or better than Indian infrastructure stocks? At any rate, most of the existing Indian infrastructure schemes are expected to continue doing well.
As far as the existing schemes from the fund house are concerned, the performance is at best mixed (see table). The best performing scheme is Kotak Opportunities Fund, which has done really well over the past three years and has substantial investments in infrastructure stocks, too.
The fund house sure has some experience in picking good infrastructure stocks, which should come in handy while building the portfolio of the new scheme.
All the same, only investors willing to hold on to their money for three years and looking for some exposure to international infrastructure stocks should look at investing in this scheme. Others would be better off keeping their home bias.
k_vivek@dnaindia.net
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}