Overseas investors lose up to 50% in India funds

MUMBAI: Unlike in the previous years, Indian equities have not paid off for overseas retail investors. The year so far has not been very good for India-dedicated offshore funds, as most of their investments have eroded by 40-50% over the past seven months.

Offshore funds specialise in investing in foreign companies or corporations. These funds have non-residential investors (often high net worth investors and institutions) and are regulated by the provisions of the foreign countries where these are registered. Most of these funds are set up in tax havens like Mauritius or Cayman Islands.

As per international fund ratings major, Morningstar’s rating log, the average year-to-date return (as on July 31, this year) of India-dedicated equity funds is as low as -39% (when converted to US dollars).

According to experts, a reason for this could well be the fact that offshore funds only invested in liquid large-cap stocks, a segment that led the market fall in the initial months.

“These funds have fallen in line with their benchmark indices; the Asian benchmark MSCI has fallen in and around 45% over the same period. Funds are likely to fall in such market conditions,” said Mirae Asset Global Investment CEO Arindam Ghosh.

Mirae Asset has an AUM of $54.64 billion in emerging markets and provides advisory services to off-shore funds that have invested over $2 billion in India. According to a fund manager who advises three India-dedicated offshore funds, such an underperformance by offshore funds could be because of the currency effect.

“With most funds valued in US dollars, and with dollar depreciating against most currencies, it would notionally appear that funds have fallen sharply. Very positively, offshore funds have taken a beating in a market that has fallen by over 40%,” the fund manager said.


From what fund managers say, the perception of investors towards India as a short-term investment destination has changed significantly over the last few months. Many investors have also downgraded their short-term target on India and the region.

There has been no redemption pressure as yet, they added. “We expect India to be in the investment radars of foreign investors as it is already an over-sold market. Offshore funds investing in Indian equities are already seeing some inflows. Retail foreign investors have a long-term view on India,” Mr Ghosh added.