When it comes to equity investing, investors are usually on the lookout for organizations that are fundamentally robust and can withstand any alterations in market place circumstances. Even in the course of the pandemic instances, some organizations came out of the pandemic scenario in a quite robust manner. One such category of organizations is multi-national organizations (MNCs).
Some of the prevalent qualities of an MNC is that such organizations have a tendency to have a robust worldwide brand, robust balance sheet, technological edge, robust management and in most instances a wide moat. As a outcome of these qualities, such organizations have the capacity to withstand a plethora of challenges. Even if there is a damaging development for such a firm in one nation their presence across quite a few nations spread across the globe assists them to continue their organization with no substantially of an effect on an aggregate level.
For an Indian investor, seeking to take exposure to these MNCs, there are quite a few choices one can look at. In the Indian listed universe, one can locate such organizations spread across sectors like customer, automobiles, metals, pharma, IT, engineering and quite a few other pockets. As a customer, we rely on numerous of these organizations from breakfast to dinner to meet our a variety of needs. For instance, we start out the day with the toothpaste from HUL or Colgate, drink a Nestle tea/coffee and the likes. This instance can be extended to laundry, automobiles, medicines for basic wellbeing and so forth. Investing in any of these names today is relatively simple. One can straight invest in these organizations or rely upon MNC themed mutual funds to do the needful on your behalf.
What is intriguing is that today investors even have the choice to take exposure to internationally-listed worldwide MNCs such as Amazon, Caterpillar, Bank of America, Ralph Lauren and quite a few other such mega-organizations. With markets about the globe performing differently every year, diversification to international markets aids in permitting investor’s portfolio to take prospective benefit of stocks listed outdoors India. While this choice might not be exercised by each fund home, there are particular MNC Funds in India that take exposure to foreign organizations getting organization operations across the globe.
As per SEBI definition of a MNC Fund, such a scheme need to invest at least 80% of their investments in MNCs, when the remaining 20% can be invested in any other instruments. Since MNC funds are thematic in nature, it is quite probably that investors could be sceptical for the reason that entry and exit points have a tendency to be quite essential when investing in a thematic fund. However, MNC theme is a league apart. This is for the reason that regardless of becoming thematic, the return profile of an MNC-based fund has been relatively constant across market place cycles. The consistency aspect is made probable for the reason that MNCs usually have a tendency to be money-wealthy organizations and have much better corporate governance requirements, as a outcome of which they are frequently deemed as good quality organizations. Even in the course of volatile instances, MNC-based funds have effectively managed to limit the downside.
Given the nature of the fund, a savvy investor can look at producing MNC fund a aspect of one’s core portfolio. On the other hand, an investor with decrease threat appetite can look at producing this fund a aspect of the satellite portfolio. Either way, an investor stands to obtain from the stability and extended-term development that these funds can provide.
When it comes to the investment choices out there, the quantity of MNC funds out there is in single digit. Within these, ICICI Prudential MNC Fund might be deemed as a robust contender as it has exercised the flexibility to invest in worldwide MNCs which are not listed in India. Data as of July 31, 2021 shows that the portfolio has about 20% exposure to such worldwide MNCs. When compared with the Nifty MNC Index (also the benchmark of the fund), one will observe that the fund portfolio is substantially more differentiated and is significantly less skewed, all of which is a positive for investors. The net outcome is that the fund has managed to outperform the benchmark by a wide margin. Since its inception (June 2019), the fund has delivered a CAGR of 29.7% as compared to 18.7% of Nifty MNC TRI.
(By Arihant Bardia, Director, Valtrust Capital)
Disclaimer: These are the author’s private views. Readers are advised to seek the advice of their monetary planner just before producing any investment.