Overseas MFs offer negative return in line with the global market meltdown

Looks like investors have no respite. Those who had invested in overseas funds seeking advantages from diversification are equally disappointed as overseas funds offered by the domestic mutual fund houses are badly hit.

The return on these funds has dipped between 40% to 48% since the beginning of the current calendar year to till date (October 10).

The sub-prime crisis leading to the financial turmoil has led to the market meltdown globally. Among the equity markets, the Shanghai Se Composite was hit the most. It shed 57% or 3,002 points between January 1, 2008 to till date. Russian Traded Index ranks second which shed 42% or 1,307 points. Likewise, both BSE Sensex and NSE Nifty shed more than 45% during the corresponding period.

Some of the global leaders shed less than the emerging markets. Nasdaq Composite Index shed 26% or 696 points and Dow Jones Indus lost 22% or 2,905 points during the said period.

This market meltdown across the globe has impacted the overseas or emerging funds. The return on the Kotak Global Emerging Markets fund was dipped by 48% and the return on Principal Global Opportunities fund has come down by 40%.

Commenting on the negative return of the overseas or emerging markets fund, a senior manager from a domestic fund house said that the US tsunami was responsible for the market meltdown across the globe.

The Lehman Brothers went bankrupt and the big financial companies like Merrill lynch and AIG are in the doldrums. The weak market sentiment worldwide has caused the market meltdown.

This is one of the main reasons for the overseas or emerging market funds showing the negative returns, he said.

It may be mentioned here that the fund houses can invest upto 60% of the fund corpus in the overseas financial markets and the rest 40% in the domestic market.

The fund mangers investment in Asia Pacific region including India , Europe, Latin America and other growing economies.

Among others, Tata Mutual Fund has also launched Tata IndoGlobal Infrastructure Fund in October 2007 which is currently offering a negative return of 47%. Birla Sun Life MF has also introduced a global fund recently.