Investing Globally

Very recently EFL was having an interactive session with a group of investors, on investment risks and the virtues of portfolio diversification. The logic is clear - It always pays to not put all your eggs in one basket. The mark of a good investor is the ability to diversify across asset classes.

A key element that captured the attention of many of them was "investing globally" - they were intrigued to find that not only NRIs but normal resident investors can also put their money in foreign securities and other asset classes. Some of these investors were curious about the ways in which they can diversify their portfolios especially from the angle of investing globally.

The point to note here is the need for global investment. Where the investments are spread across asset classes there is significant risk diversification. However, if all these asset classes are located in the same country, then there's still need for better diversification as geographical risk continues to remain. Global investments present the opportunity to put your money in economies that are larger or fast-growing and even in specific stocks presenting sectoral opportunities that are not present in India.

Look to other countries for investment. While it helps in diversification, it also helps to get better returns as there are more investment options open. Additionally, it helps to guard against currency fluctuations. Investing in foreign markets (e.g., US equities, global ETFs) means that your investments being denominated in such currencies as USD, remain protected against present and any possible forthcoming depreciation in value of the domestic currency. USD generally tends to strengthen against emerging market currencies during economic uncertainty. By allocating a portion of a portfolio to international assets, investors can protect their purchasing power and capitalize on currency gains, as foreign assets appreciate in local terms when the home currency weakens.

Figure 1: Benefits of Global Investing

Indian investors are, therefore, considering Global investing seriously, to help them reduce risk by diversifying beyond domestic markets, especially when Indian valuations are high. So, what are the ways in which an investor can invest globally??? We present to you 4 options

1. Gift city: Gujarat International Finance Tec-City or GIFT City, as it is popularly called, is the country's first international financial hub.
   
   
   1. Several money managers are establishing operations there with the purpose of easing global investing for both NRIs and resident Indian investors. It uses various platforms for providing access to international stocks, often allowing for fractional ownership. These platforms have partnered with multiple international brokers, including Interactive Brokers to provide superlative customer service.
   2. It allows residents and NRIs to invest in foreign currency-denominated assets, including global stocks, mutual funds, and bonds, etc., using international, tax-efficient structures regulated by the IFSCA. GIFT City provides you access to global stocks through LRS, with an added advantage of having no cap on the amount that a GIFT City itself invests in the Global Market. This route does however have a personal limit of $250,000.
   3. DSP Fund Managers, Mirae Asset, SBI Funds, Nippon India, Aditya Birla Sun Life, HDFC, IIFL, and Motilal Oswal, operate structured funds in GIFT City.
   
   
2. Indian MFs that invest globally: Invest in Indian mutual funds that invest in foreign markets. investing internationally via mutual funds and FoF seems like the most convenient routes to access global opportunities. One can invest in these funds without the need to open a separate overseas trading account. Small investors can also access these funds. This is an extremely convenient route and does not always require a separate international account.
   
   
   1. Global investing through Indian mutual funds allows investors to diversify beyond domestic markets, accessing international equities, particularly in the U.S. technology and broader global sectors. There is No need for transfer of foreign exchange. These do not come under RBI's Liberalised Remittance Scheme LRS, hence no Tax Collected at Source (TCS) or foreign reporting is needed.
   2. The investor does not have to make large mandatory financial commitment. He can make small minimum investment. SIP options are available.
   3. International funds invest in countries other than the domestic market, while global mutual funds have a bigger arena. They have the option to invest in all the countries across the globe alongside the domestic market. These funds offer the advantage of being able to access global companies through domestic fund houses. They are backed by the expertise of leading fund managers across the globe. However, there is a cap on how much Indian mutual funds can invest globally.
   
   
3. DIY: This involves direct account with international brokers. You can open an account directly with an international broker.
   
   
   1. Eastern Financiers has partnered with Stockal to facilitate international investing, specifically allowing Indian investors to invest in U.S. dollar securities and foreign stocks. Eastern Financiers acts as a referrer, connecting clients to the Stockal platform for global. The right global investing platform helps simplify complexities of overseas investment by offering guided investment paths, tax documentation, secure payments, and compliance with RBI's Liberalised Remittance Scheme (LRS).
   2. Once on board, investors will typically have access to multiple global markets. You will need to open a foreign currency account. Money can be transferred from any of the Indian banks offering competitive forex rates
   
   
4. PINETREE Macro: EF empowers its clients with enhanced diversification by facilitating seamless global investment opportunities through our Pinetree Macro platform. Pinetree Macro was set up with an objective of adding true geographical diversification to the investor portfolios. The firm backs an ‘Active Asset Allocation' strategy using US listed ETFs/ETNs guided by an objective to deliver absolute return with focus on low volatility & minimal drawdowns.
   
   

   

   Figure 2: Pinetree Macro's Core Strategy (Source: https://www.pinetreemacro.com/ )

So next time you decide to build or diversify your portfolio and part of that strategy is going global, remember that it is imperative for breaking the concentration risk and country risk of investments - removing the country bias. For individual investors, the right guidance will help to achieve better results.

We have an interactive team of well-trained professionals to take you through the entire process without much hassles and guide you on the taxation and other aspects that you may be concerned about. We also have informative blogs that provide useful information and knowledges on various aspects of global investing. So, do not hesitate - reach out and let us take you through this interesting investment journey.