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Both open-ended funds will invest in BlackRock’s international funds and they are benchmarked against indices that have given far lower returns than the Sensex or Nifty
Indians have not been keen to channelise their savings into mutual funds, for a variety of reasons, this despite the excellent performance of many schemes over the last decade. So, it is a surprise that fund companies think Indian savers would be keen to invest in funds for overseas markets. The number of fund houses that have planned to raise money from Indians, to invest in overseas securities, is turning into a torrent.
DSP BlackRock Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch two more global funds-DSP BlackRock Global Allocation Fund and DSP BlackRock Global Dynamic Equity Fund. Both are open-ended fund of funds (FoF) schemes investing in BlackRock's international funds.
DSP BlackRock Global Allocation Fund plans to invest in units of BlackRock Global Funds-Global Allocation Fund (BGF - GAF). It has given a return of just 5.4% over the last five years and 10% since its inception (3 January 1997).
BlackRock Global Allocation does a bit of everything: short selling, junk bonds, convertible securities, and investments in emerging markets. The fund is in turn benchmarked to 36% S&P 500 Composite; 24% FTSE World (ex-US); 24% ML US Treasury Current 5 Year; 16% Citigroup Non-USD World Government Bond Index. The benchmark has given a return of 5.2% in the last five years and 8.3% since inception, while the Sensex and the Nifty have returned 12% CAGR (compounded annual growth rate) over the past five years. The Sensex and the Nifty have returned 13% (CAGR) since January 1997.
DSP BlackRock Global Dynamic Equity Fund plans to invest in units of BlackRock Global Fund-Global Dynamic Equity Fund (BGF-GDEF). It has given a return of 5.77% since inception (28 February 2006). This foreign fund is benchmarked to 60% S&P 500 plus 40% FTSE World Series ex-US. The benchmark has given a return of 1.2% over the last five years and just 2.05% since inception (28 February 2006).
These funds are good only for foreigners, as they don't have too many alternatives. It's not clear why Indian investors should invest in these funds, when the market at home is giving higher returns than what the global funds provide. These global funds are investing in a slow growth, low return environment. With inflation at 8%, investing in funds that have given a return of 5.2% and 1.2% in five years does not appear to be a great choice.
DSP BlackRock Global Dynamic Equity Fund will be benchmarked to 60% S&P 500+ 40% FTSE World Series ex-US. And DSP BlackRock Global Allocation Fund will be benchmarked to Benchmark 36% S&P 500 Composite; 24% FTSE World (ex-US); 24% ML US Treasury Period Current 5 Year; 16% Citigroup Non-USD World Government Bond Index. The benchmarks themselves are too complicated for the average investor.