As their name implies, MNC funds invest in multinational corporations, generating sizable amounts of revenue from their domestic and international business operations. In addition, due to their propensity for economies of scale, businesses frequently export their goods to other nations, where they do well financially.
Because these funds typically have high-ranking companies in their portfolio, they have outperformed most funds. These businesses have a competitive advantage over their rivals because of their extensive geographic reach and well-known brand names, which gives them significant market pricing power. They typically perform through all market cycles and offer superior returns.
There are some factors you should consider that are associated with these funds and their benefits. First, these funds tend to lose out on the variety in the portfolio that comes with a diversified fund because they are thematic and invest in only a specific group of companies.
This blog will show the most popular MNC Funds of India of 2023 and some factors one should consider before investing in these funds.
MNC Fund Names
A significant risk associated with these funds is the economic and political risk. In addition, since these firms have a global presence, they need to consider and adhere to the rules and regulations of different countries and adhere to them.
Suppose a particular country faces political risks, like an unstable government or war-like situation. In that case, it can adversely affect the company and, thus, its performance in the equity market.
The same goes with economic risk, viz., a slowdown in a particular country or trade tensions with peers can sway the company's operation and profitability.
If you are already investing in diversified equity funds and still want to invest in an MNC fund, then this can lead to replication as the stocks that are already present in your diversified equity portfolio are repeated in the MNC fund.
Investing separately in an MNC fund is not advisable if you have an existing diversified portfolio.
Since the number of MNC companies is limited compared to other domestic companies, fund managers always face the issue of adding variation to their portfolios.
Also, these funds are seen as favorable only when the market is not performing well; when the needs are in good shape, then mid-cap and small-cap companies are preferred by investors to gain maximum returns seen in a bullish market.
A small investor usually doesn't invest in these funds often because of the high valuation factor.
MNC companies that are part of these funds are valued highly as these firms have a strong geographical presence, and thus, it is seen that investors are still willing to invest in these funds via a systematic investment plan (SIP) and also should consider supporting in them for longer time horizons say 3-5 years.
Since the parent companies charge high royalty fees to the subsidiary company, it may affect the company's earnings in the shorter run. However, since the sales aggregate is high for such companies, it does not affect the company noticeably.
The scheme seeks to provide the investor with long-term capital appreciation by investing in a diversified portfolio composed primarily of MNC companies.
The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of multinational companies.
The scheme would invest exclusively in securities of multinational companies to achieve long-term capital growth at relatively moderate risk levels. A portion of the fund will also be invested in IPO and other primary market offerings.
The scheme seeks long-term capital appreciation by investing predominantly in equity and equity-related securities within the MNC space.
Investing in Thematic funds can be risky and should be done at the investor's discretion. However, if the investor is confident about the fund, they should invest in MNC Funds as they offer multiple benefits, and in recent times, these funds seemed to have outperformed standard Equity funds.
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory
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Research Analyst - Himanshu Sinha