10 Best International Mutual Funds in India in 2023

Equity funds that invest largely in stocks of companies listed outside of India are known as international mutual funds. By accepting a greater risk involved with investing in international markets, these funds assist in diversifying the mutual fund's investment portfolio and aid the funds in generating higher returns.

1. Introduction

Equity funds that engage in stocks of companies listed outside of India are known as international mutual funds. They make it possible for investors in the nation to make investments abroad. Given that it has opened up access to foreign investment, this type of investment is one of the simplest ways to invest in the global stock market. If you intend to invest in foreign funds in India, this article is for you.

Equity funds, commonly referred to as international funds, invest in the equities of companies listed on foreign exchanges. Investors are becoming more aware of global investment alternatives as more and more people explore the numerous investment options. Investing in these funds carries risk because it is challenging to follow a nation's market fluctuations in the midst of numerous global and economic developments.

Due to the erratic nature of local stock markets, investors are increasingly drawn to international mutual funds as a viable investment alternative.

2. What Are International Mutual Funds?

Investments in the stocks of overseas corporations like Apple, Amazon, Barclays, Deutsche Bank, Fiat, Novartis, etc., are made through Indian equity funds known as international funds.

No need to deal with the tiresome and difficult chore of selecting certain overseas stocks on your own, thanks to international mutual funds.

With the help of the fund's international holdings portfolio, a fund manager performs that on your behalf. That's not all, though. It's as simple to invest in an international fund as it is in any other mutual fund.

Other benefits of investing in overseas funds include: 

• Not requiring a brokerage account; 

• Not requiring LRS;

• Historical returns of 16–20%; and 

• Low minimum investment amounts.

3. Types of International Mutual Funds

International funds can be broadly divided into three categories based on the investments they make. Top worldwide mutual funds are divided into 3 divisions according to how they invest.

Global, regional, and sectoral international mutual funds are included in this category.

1. Global International Funds

There is a purpose for the phrase "global international finances," despite the tautology-like appearance. Instead of focusing on a single nation, global funds invest in stocks from all around the world.

For instance, through the PGIM Jennison Global Equity Opportunities Fund, the PGIM India Global Equity Opportunities Fund makes investments in equities from the United States, France, Singapore, the Netherlands, Switzerland, and other countries.

International funds and global funds are not the same things. A global fund is one that makes investments in businesses operating in any jurisdiction, including the investor's own and other nations around the world. The only money available outside of one's own country is referred to as international funds.

2. Regional International Funds

Global funds are the antithesis of regional international mutual funds. They exclusively make investments in the stock market of one nation or area. Index funds are a good illustration.

They follow a single index from one market (country). The Motilal Oswal S&P 500 Index Fund, for instance, invests in all the equities included in the S&P 500 US index.

A regional fund is a fund that makes securities investments in a certain geographic area, such as Europe, Asia, etc. The majority of investors put money into these funds to diversify their portfolios for those regions they are well-versed with.

3. Sectoral International Funds

Highly specialized funds, known as sectoral or thematic funds, seek to profit from the advantages of a particular industry. For instance, consumer durables, healthcare, and power.

A global sector fund makes investments in particular industries in a foreign nation. This enables investors who are interested in a specific industry to fund such projects and profit from them.

4. Country Funds

A country fund is, as its name implies, a fund that makes investments in a certain nation. A country fund, for instance, might invest in stocks and other assets offered by, say, the United States of America. As a result, it is possible for investors to focus their risk and return expectations on a single market, making it simpler to research and evaluate.

4. Features of International Mutual Funds

Diversification

International funds give investors a fantastic opportunity to diversify their investment portfolio because they buy stock and debt assets all around the world. Investors can benefit from the local market circumstances, thanks to this as well.

Risk

It is challenging to constantly monitor the social and economic conditions of a foreign country when your investment portfolio includes securities from that nation. Acquiring accurate and technical understanding regarding their market movements is similarly challenging. International funds are now more exposed to risk as a result.

Management of money

The need to monitor global market movements makes real-time market monitoring crucial. As a result, the investments are managed by fund managers, who are qualified individuals with extensive expertise in managing such investments.

Exposure

International funds invest in equity and debt instruments of different nations, allowing the funds to profit from the investment by leveraging the nation's changing economic situations. This aids in ensuring that the investment portfolio suffers the fewest possible losses.

5. 10 Best International Mutual Funds to Invest in India

ICICI Prudential US Bluechip Equity Fund

By primarily investing in equities and equity-related securities of companies listed on reputable stock exchanges in the United States of America, ICICI Prudential US Bluechip Equity Fund seeks to provide long-term capital appreciation to investors.

Nippon India US Equity Opportunities Fund

Investment Objective: The programme invests largely in equities and equity-related securities of companies listed on reputable US stock exchanges, with the remainder going into debt and money market instruments in India, with the goal of providing long-term capital appreciation to investors.

Franklin India Feeder Franklin US Opportunities Direct Fund-Growth

Franklin India Feeder - Franklin US Opportunities Growth Fund's major goal is to invest in international markets, specifically in units of Franklin US Opportunities Growth Fund that, in turn, invest in securities of businesses with their main operations in the USA.

Edelweiss Greater China Equity Off-shore Fund

An equity fund is Edelweiss Greater China Equity Offshore Fund Direct Plan-Growth. The first day of 2013 saw the launch of this fund. Bhavesh Jain and Bharat Lahoti are the fund's managers. Long-term inflation may be outperformed by the fund.

Essential factors

1.  As of 10-11-2022, the Edelweiss Greater China Equity Off-shore Fund Direct Plan Growth's NAV was 34.163.

2. With $1269 Cr in assets under management (AUM) as of September 30, 2022, Edelweiss Greater China Equity Off-shore Fund Direct Plan-Growth is larger than the category average.

3. The cost ratio for the fund is 1.44%.

PGIM India Global Equity Opportunities Fund

An equity fund is PGIM India Global Equity Opportunities Fund Direct Plan-Growth. The first day of 2013 saw the launch of this fund. Rahul Jagwani is the manager of the fund. Long-term inflation may be outperformed by the fund.

Essential factors

1. As of 10-11-2022, the NAV of the PGIM India Global Equity Opportunities Fund Direct Plan-Growth was 28.23.

2. PGIM India Global Equity Opportunities Fund Direct Plan-Growth has larger assets under management (AUM) than the industry average of 1254 Cr as of 30-09-2022.

3. The cost ratio for the fund is 1.41%.

IDFC US Equity Fund of Fund

IDFC Mutual Fund offers an international mutual fund product called IDFC US Equity FoF Direct - Growth. This fund was established on July 29, 2021; therefore, it has been around for one year and 3 months. The medium-sized fund in its category, IDFC US Equity FoF Direct - Growth, with assets under management (AUM) of 324 Crores as of September 30, 2022. The fund's expense ratio, which is lower than that of the majority of other international funds, is 0.42%.

• IDFC US Equity FoF Direct - Over the past year, growth returns have been -15.95%. It has produced -9.77% annual returns on average since launch.

• The majority of the fund's investments are in the financial industry. As compared to other funds in the category, it has invested less in the financial industry.

• JPMorgan Funds - US Growth Fund I houses the top five holdings of the fund (ACC).

DSP US Flexible Equity Fund

The DSP US Flexible Equity Fund makes investments in some of the biggest and most recognizable US businesses, including some of the biggest IT firms in the world. By making investments in BGF - US Flexible Equity Fund, it achieves this. It searches for appealing prospects at fair prices and concentrates on businesses that are strong, successful, fairly valued, and have free cash flow.

Navi US Total Stock Market Fund of Fund

Vanguard Total Stock Market ETF is where Navi US Total Stock Market Fund of Fund invests (VTI). VTI monitors the performance of the 4000+ small, mid, and large-cap company CRSP US Total Market Index, which accounts for approximately all of the US investable equity market. The NFO will begin on February 4, 2022, and end on February 18, 2022.

• Currently, only this fund in India offers the chance to invest in Vanguard, the inventor of inexpensive passive fund management strategies.

• The third-largest ETF globally is VTI. Its assets total $1.3 trillion, or 10% of all assets in US stock mutual funds and ETFs.

• The CRSP US Total Market Index is a thorough and broad index with exposure to various industries. NASDAQ 100, a large-cap index with a stronger exposure to the technology sector, serves as the basis for the majority of the US-focused index funds now available in India.

• This investment may provide a potential hedge against the INR's decline in value relative to the USD.

SBI International Access US Equity FoF

SBI International Access - US Equity FoF is a fund-of-funds strategy with an open-ended structure. The plan invests in units of one or more ETFs or mutual fund schemes that are headquartered abroad and primarily invest in US markets in order to provide long-term capital appreciation.

Motilal Oswal Nasdaq 100 Fund of Fund (G)

The Motilal Oswal Nasdaq 100 Fund of Fund (G) is a US Equity International Equity scheme that invests primarily in International Equity Stocks with the long-term goal of building wealth.

6. Benefits of Foreign Funds

The advantages of foreign funds are numerous:

Geographic Diversification

It is challenging for one nation to continually rank first. Therefore, even if you don't have a chance this year, you may have one the following year. Every nation has its own economic cycle on a macroeconomic level. You can encounter fewer ups and downs by making investments in other nations.

Portfolio Diversification

A portfolio includes high, medium, and low-risk investments. One can make up for a weak domestic market by tapping into the international market.

Investment Financial Goal

You can use your international exposure to achieve your financial goals, such as paying for higher education or saving for retirement, by diversifying your investment portfolio and using foreign currency as leverage.

7. Who Should Invest in International Mutual Funds?

Investors who are well-versed in the movements and operations of the global markets are suited for investing in foreign funds.

Investment hazard

1. These funds are not appropriate for investors who are unwilling to assume the risks associated with the equity markets because their investment portfolios primarily consist of equities securities from international marketplaces.

2. The amount of risk varies depending on the investor's age, cost of living and motivation to accumulate cash. The risk level for a 25-year-old investor will be different from a 50-year-old investor.

3. Those investors invest in international funds in order to diversify their current portfolio. This will guarantee that their money is invested in assets across international markets and allow them to profit from market fluctuations there as well.

4. International funds can be invested in by investors that are well-versed in the regional economy and market environment.

8. How do International Mutual Funds Work?

The structure used by international mutual funds is a master feeder. The investor's money is put into the feeder fund, which invests in the master fund as part of a three-tier structure. Finally, the monies are invested in the market by the master fund.

In India, investing in foreign funds is equivalent to investing in an equity fund. The money is invested by the fund manager in equities of businesses that are traded on exchanges outside of India. The fund manager may invest directly in the stocks, in already-established international funds, or in a pre-made portfolio of overseas assets. These investments are managed by Indian mutual fund companies, which are subject to SEBI regulation.

9. How To Pick an International Mutual Fund?

To choose the best international mutual funds in India, the steps listed below must be taken:

• The fund's track record needs to be examined.

• Keep an eye out for qualified and experienced fund managers.

• The plan must enhance the present portfolio.

• To learn about all the underlying costs and expenses, carefully read the document.

• To prevent double taxation, make sure the nation you select has a tax treaty with India.

10. Tax on International Mutual Funds in India

Despite having stock investments as their underlying asset, there is a slight peculiarity in the way that overseas mutual funds are taxed. It makes sense to presume that they will be taxed in the same way as all other equity mutual funds in India. However, this is untrue. International fund returns are taxed in the same manner as debt fund returns. A capital gain occurs when you earn from selling your investment. The capital gains from selling your investment are taxed based on how long you owned it, according to the debt taxation scheme. The same is true of foreign funds:

Short-Term Capital Gain (STCG):

Short-term capital gains apply if you redeem your overseas fund investment within three years. Your income is increased by these gains or earnings, which are then taxed in accordance with the tax bracket you are in.

Long-Term Capital Gain (LTCG):

Additionally, if you invest for three years or longer, your returns are categorized as long-term capital gains (LTCG). After indexation, the tax rate on these gains is 20%.

11. Factors to Consider Before Investing in Foreign Funds

When investing in foreign funds, a variety of variables need to be taken into account:

1. Currency risks: As your rupee investment is turned into foreign money, this is the risk that occurs most frequently. Therefore, before redeeming overseas mutual funds, it is crucial to check the currency rates.

2. Political and economic risks: Different countries may experience political events, which could enhance unpredictability risks for investors.

3. Investment objective: The investment goal should align with your financial requirements. For overseas mutual fund investments, a five to seven-year investment horizon is advised.

4. Choosing the correct country/region: While developing countries are riskier, they offer predictable rewards and little risk. Investing is always a good idea in nations with solid corporate governance and a sound legal framework.

12. Final Thoughts

Investors wishing to capitalize on economic growth in other economies may consider investing in international funds. These investors are prepared to make long-term investments and have a high tolerance for risk. It should be emphasized that experienced and knowledgeable investors are better suited for such transactions. By assessing your comfort level and risk tolerance, look into the best international mutual funds available in India.