Should you invest in International Funds?

In the last one year, many funds have been launched that will either invest in the international market directly or will invest in funds that invest in the international market. There has been a rage of investing in international funds. The interesting part is that in the last couple of months there has been an increase in inflows towards China dedicated funds despite their bad performance. Most of the funds dedicated to the Chinese market have generated a negative return in the last six months. 

Since last October, Chinese authorities have started a regulatory crackdown in some of the tech giants of China, which has seriously impacted returns of the fund that invest in the Chinese market. Two funds Axis Greater China Equity fund and Edelweiss Greater China Equity Off-shore Fund has seen their AUM growing tremendously in the last few months despite its net asset value (NAV) showing a negative trend. There are almost 45 Fund of Funds (FOF) in India that invest in international markets. At the end of August 2021, they have a combined asset under management (AUM) of approximately Rs 26000 crore.   

The last one month, especially, has not been very good for any international funds. This is also true for US market dedicated funds. Except for a couple of them, all the 39 international FOFs have given negative returns. Compare this with Nifty 50, which has given a return of 1.2 per cent return in the same period. Even in the last year the Indian equity market and funds dedicated to the Indian equity market on average have generated better returns than the international funds. 

So, you can apportion some part of your portfolio towards international funds, however, the majority should go to equity dedicated funds at least for now.