HSBC MF plans to launch two foreign schemes. Moneylife has shown in the past that these schemes offer no clear edge when it comes to diversification

At a time when foreign institutional investors are flooding the Indian market and Indian equity mutual fund investors are withdrawing their investments, HSBC Mutual Fund plans to launch two global schemes—HSBC Russia Equity Fund and HSBC Asia Pacific (Ex Japan) Dividend Yield Fund, hoping Indian investors would be willing to put their money in foreign equity. Both these schemes will invest in the units of schemes of HSBC Global Investment Funds. HSBC Russia Equity Fund will invest in the units of HSBC Global Investment Funds (HGIF) Russia Equity Fund and the other scheme will invest in the scheme of HSBC Global Investment Funds (HGIF) Asia Pacific Ex-Japan Equity High Dividend Fund.
 

We have repeatedly written about global schemes earlier which have had a lacklustre performance in the past. At present, we have 36 global funds; of which as many as 21 of these were launched during 2007 and 2008—the period when foreign funds had become a fad. When they were launched, Moneylife had pointed out that these funds were marketing gimmicks. Our advice was to stay away from these funds.
 

In a recent analysis, we showed that out of 22 global schemes that were launched prior to January 2009, just four outperformed the BSE 200. (Read: Global Funds: Lacklustre performance) In fact in the last one-year period ended December 2012 when the BSE 200 returned 30.80%, just two global schemes managed to do better.
 

Funds that put your money in other countries don’t necessarily offer much diversification. In fact, markets around the world have been moving in sync. Some of these schemes have been highly correlated with the Sensex.
 

The new schemes would essentially invest in schemes that are managed by the fund managers of HSBC Global Investment Funds. Neither of the two foreign schemes have a long-term track record. HSBC Global Investment Funds-Russia Equity was launched in December 2007. According to data available on Bloomberg, over the last three years it delivered a return of -2.01%. Over the last one year the scheme returned 7.71%. The performance of the scheme will be benchmarked to the MSCI Russia Index. HSBC Global Investment Funds-Asia Pacific ex-Japan Equity High Dividend is a relatively new scheme, being launched in March 2011. Over the last one year the scheme delivered a return of 17.66%. The performance of this scheme will be benchmarked to MSCI AC Asia Pacific ex-Japan.
 

The fund management of HSBC Mutual Fund in India has not done too well. Schemes of HSBC Mutual Fund have regularly come up in our performance analysis of equity schemes for all the wrong reasons. Some of its schemes have performed poorly in the last few years.