When we speak about diversification to international funds, the question most people ask is “why should I when I am making money here in India”? Point noted. But could you not have made more money? For instance, Brazil Index gave a return of 136% in 2009 compared to 80% of Nifty. China also gave a return of 80%.
Consider this: What if there is an event that could shake the Indian markets more? I say “more” because any event that spooks India would shake the global markets. The event could be in the form of anything:
Our neighboring country pokes its nose in the form of a war
An issue causes dissent in ruling coalition and brings the government down
Some random calamity (God forbid!)
Government decides to borrow more which spikes interest rates
So, it’s a good idea to hedge our portfolio. I am not asking to hedge with a Japanese fund or a UK fund. Brazilian and Chinese ones could help. These countries are growing just like ours and have better Debt/GDP ratio and fiscal discipline. More than taking country bets, it is better to take stock bets if it compliments our portfolio. Why not an agri based company in Brazil? a semi conductor company in Taiwan? a bottling company in China? a green energy company in US? Of course, picking up a stock (globally) is a complicated process.
What is easy is choosing a country fund. I would like to high light the Latin America funds here. For a retail investor, ING Latin America fund can be a best bet as it feeds your investments into the Luxemburg based fund. As little as Rs 5000 can be invested in this fund.
If one were rich (super rich actually) and wants to choose the best Latin America funds, she could go for HSBC Brazil fund which is Brazil focused and Blackrock Latin America fund which covers the entire region of Latin America. These funds have a minimum limit of USD 5000 and will come under the USD 200k remittance limit.
The snapshot of the funds is given above.
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