Why are International Mutual Funds struggling


International mutual funds as a category have gained both prominence and acceptance in recent times by the average retail investor.

This should not come as a surprise given the recent outperformance by international mutual funds compared to the Indian markets.

So keeping in trend with investors hopping on to the latest fad that has outperformed, aum for international mutual funds has spiked up considerably.

As unhealthy as this trend may be, it is here to stay considering recent returns trumps planning when it comes to most retail investors and their portfolio creation.


best mutual funds

What is an international mutual fund?

An international mutual fund is any fund that invests outside Indian markets.

This could be both, region specific or theme specific.

International mutual funds can either invest directly or in another fund, better known as fund of fund.

Their correlation with the Indian markets would differ depending upon where you invest geographically.

The lower the correlation, the better for diversification.

International mutual funds work as a very good hedge against currency volatility.


Additional reading: Click Here to read Why you need a financial plan 

Difference between global and international mutual fund

An international mutual fund is one that invests in specific countries or regions.

A global fund on the other hand is not restricted by specific countries or regions.

A Europe based fund is an international mutual fund since it invests only in Europe, a specific region.

A global brand fund or a global mining fund is a global fund since it invests across the globe with no region restrictions.


Are you investing in the right mutual funds?

Why are International mutual funds struggling?



Post the 2008 financial crisis, central banks across the globe have kept interest rates on the lower side to encourage growth.

A very obvious side-effect of this approach is the rise in inflation since easy liquidity fuels inflation.

Coupled with the Ukraine-Russia conflict and the continued lockdown in China disrupting the global supply, rising rates have added to inflation.

In March 2022, the US for example had its highest inflation rate for around 40 years.

To counter the rising inflation, in May 2022, the Reserve Bank of India hiked the Repo rates by 40 basis points to 4.40%.


How inflations impacts Equities

High inflation brings along with it higher interest rates in order to tackle high inflation.

Higher interest rates means higher input costs for businesses.

These higher costs are then passed on to the end customer.

All of this leads to higher prices for the end customer.

Demand therefore takes a hit which in turn leads to slower economic growth.

Lower economic growth would mean pressure on earnings growth of companies which therefore means moderate growth for the companies.


Additional reading: Click Here to read on how to invest in mutual funds

Ukraine- Russia Conflict & The China lockdown

Just as most of the world was coming back to terms to some sort of normalcy, the Ukraine- Russia conflict has thrown a spanner in the works.

China continues to struggle with containing and therefore stricter lockdowns still prevail.

Both these situations have disrupted the global supply chain.

Crude oil has touched new highs while there are fears of an impending food scarcity.

The Ukraine-Russia conflict has completed 100 days and there are no signs of a ceasefire yet while the stricter lockdowns in China too show no signs of receding.

Equity markets do not take a liking for uncertainty.




1 yr Return

Invesco Ind – Invesco Global Consumer Trends FoF

-38.85 %

PGIM Ind – Emerging Markets

-38.61 %

Edelweiss Greater China

-30.74 %

PGIM Ind - Global Opportunities

-28.32 %

HSBC Brazil

-27.30 %




The biggest advantage of international mutual funds is that they provide diversification.

They are very rarely the first fund of a new investor or even take up the major portion of anyone’s portfolio.

They are usually an afterthought or take up a very portion of a mutual fund portfolio.

They invest in companies and markets that Indian based mutual funds do not.


Are you investing in the right mutual funds?

Low Co-relation

International mutual funds have a very low co-relation to Indian based mutual funds.

This stands true for global funds as well.

Due to a low co-relation, international mutual funds provide diversification in the true sense.

More often than not investors invest in various funds with the aim of diversification but end up unknowingly investing in the same set of companies or strategy via different schemes.


Where most investors go wrong with international mutual funds is in being unable to take advantage of the diversification and low co-relation benefits of international mutual funds.

Most investors who seek diversification via international mutual funds in reality end up investing either in US or a regional fund like China or various thematic funds like tech, agriculture, etc.

This can be attested by surveying the AUM of various international mutual fund schemes.

This defeats the very purpose of diversification.

A global fund would make more sense or if one is adamant about investing in a developed economy (considering India is a developing economy) then a global developed market fund can also be looked at.



Understanding the market

Whatever international mutual fund you pick, understanding the fund and its underlying strategy is very important.

This is true for an international mutual fund as it is for an Indian based mutual fund.

Sadly far too many investors go about choosing funds based on their recent returns with no understanding and end up frequently entering and exiting funds.

This only adds to their charges with exit loads and taxation.


You should not be investing in international mutual funds merely because you can.

You should only if you have a plan and a very good understanding of the fund and the underlying strategy of the fund.

Sadly many investors venture into international mutual funds out of fear of missing out, that is not a good enough reason to invest in international mutual funds.


For portfolio enquiriesemail us with your doubts at info@themutualfundguide.com

Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing

Copyright © 2022  The Mutual Fund Guide, All rights reserved 

My Instagram