Global Investment for Indians: Alternatives to Blocked Funds

If you are an Indian investor looking to diversify your portfolio internationally, you might be finding it challenging as many direct international mutual funds are currently unavailable.

However, there are still ways to access global markets, with experts Ashutosh Gupta and Dhirendra Kumar highlighting two primary alternative routes: the GIFT City and the Liberalised Remittance Scheme (LRS).

The Promise of GIFT City Investments

The GIFT City route is emerging as a promising option for mutual fund investments, though it is still in its developmental stages.

• It is anticipated to become a routine and secure channel within the next six months to a year.
• Approximately 15 fund companies are reportedly in the pipeline to offer products through this route.

This channel is expected to provide the same regulatory protections you would find with domestic mutual fund vehicles, offering a familiar and secure investment environment.

Understanding the Liberalised Remittance Scheme (LRS)

The Liberalised Remittance Scheme (LRS) offers another path, allowing Indian residents to open overseas broking accounts and invest directly.

• You can remit up to $250,000 annually through the LRS.

This allows you to invest directly in international Exchange Traded Funds (ETFs) or individual stocks, giving you more direct control over your global holdings.

However, experts caution against direct stock investments due to potential complexities such as estate taxes and a general lack of understanding regarding tax treatments and investment structures.

While international ETFs are an option, they are currently trading at a premium to their underlying Net Asset Value (NAV) because they cannot accept fresh money, making them less attractive and more speculative for new investments.

Why International Diversification Matters

Despite these hurdles, international diversification remains important for your portfolio, helping to spread risk and potentially capture growth opportunities abroad.

Mutual funds are highlighted as the most convenient and risk-reducing vehicle for most Indian investors, simplifying access to global markets.

You might also consider the Kotak Pioneer Fund, a domestic fund that currently holds international exposure, though this exposure is expected to decrease over time.

Your Next Steps for Global Exposure

As the investment landscape evolves, exploring both the developing GIFT City route and understanding the nuances of the LRS can help you achieve your international diversification goals.