Last Updated on October 1, 2023 at 5:43 pm
MNC mutual funds invest a major portion of their portfolio in multinational corporations (MNCs). Since MNCs typically run efficient businesses, they are good picks in an individuals stock portfolio. However, does it make sense to invest in a mutual fund that predominantly in MNC stocks? Let us find out. There are three mutual funds with an MNC theme: UTI MNC Fund, ABSL MNC FUnd and SBI Global MNC Fund. In this article let us compare their performance with Nifty 50, Nifty MNC index and with each other.
Summary of the MNC funds available. ABSL MNC fund was launched in April 1994, currently has an AUM of 3492 crores (all options and plans combined) and an expense ratio of 1.2% (direct plan). UTI MNC fund was launched in Jul 1998, currently has an AUM of 2092 crores and an expense ratio of 1.43% (direct plan). Much of the current AUM would be in regular plans. There are two reasons for this: good commissions for the regular plans and lack of exposure among direct investors. SBI Magnum Global fund was launched in Sep 1994, currently has an AUM of 3486 crores and an expense ratio of 1.42% (direct plan). However, this fund was a mid cap fund before 15th May 2018.
Caveats and warning: In this article, I have assumed that the UTI and ABSL MNC funds have not changed their investment strategy since inception as I could not find any such evidence. In case, this assumption is incorrect, kindly let me know with proof. Investors should understand that investment in thematic funds come with greater risk than diversified fund even if past volatility is lower (as in this case). This is because thematic funds tend to invest in stocks of a particular type and uncommon factors like war, sanctions, regulations etc can affect them more than other diversified funds. Therefore, they have invisible or hidden risks and it is important to keep this in mind when evaluating them.
Definition of MNC Companies
SBI Magnum Global defines MNC Companies as those with a major shareholding by a foreign entity or Indian companies having over 50% turnover from regions outside India or Foreign listed Companies and 80% of the portfolio will have such stocks. Many MNC companies have good ROE, ROCE and an excellent track record of governance. This makes them (typically) less volatile than other stocks. There is however a difference between picking and choosing MNC stocks for an individual’s direct equity portfolio and investing in an MNC fund.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
NIfty MNC Index Constitution
This is a 15 stock index with the following eligibility criteria
i. Companies must rank within the top 800 by average full market capitalisation and average daily turnover for the last six months..
ii. Companies should have a foreign shareholding of over 50%.
iii. The company’s trading frequency should be at least 90% in the last six months.
iv. The company should have a listing history of 6 months (3 for IPOs)
v. Final selection of 15 companies shall be done based on the free-float market capitalization of the companies.
As per current factsheet (linked above), these are the top 10 stocks with weights
- Maruti Suzuki India Ltd. 10.01
- Hindustan Unilever Ltd. 9.99
- Britannia Industries Ltd. 9.78
- Vedanta Ltd. 9.45
- Ambuja Cements Ltd. 4.86
- Colgate Palmolive (India) Ltd. 4.72
- United Spirits Ltd. 4.64
- Bosch Ltd. 4.52
- Ashok Leyland Ltd. 3.69
- Procter & Gamble Hygiene & Health Care Ltd. 2.87
All three MNC funds currently hold more than twice the number of stocks in this index. This is good for volatility (lower) and may or may not be good for returns.
Nifty 50 vs Nifty MNC (5 years)
First, let us consider (as usual!) every possible 5 and 3 year period for comparing returns and risk (standard deviation). If you wish to know more about standard deviation, you can check out this video.
Nifty 50 vs Nifty MNC (3 years)
Nifty MNC has outperformed Nifty 50 at typically lower or comparable risk. Now let us find out how the MNC funds have fared against both these indices.
UTI MNC fund vs Nifty MNC vs Nifty 50
Three years
Five years
ABSL MNC fund vs Nifty MNC vs Nifty 50
Three years
Five years
We shall not consider SBI magnum global as it does not have a long enough history as an MNC themed fund.
UTI MNC Fund vs ABSL MNC Fund
Three years
Five years
There is not much difference between the two funds. ABSL MNC has produced a bit more return at a bit more risk. Over 5 years both funds have comfortably beat Nifty 50 and have just about managed to keep pace with or do better than Nifty MNC Index. However, the three-year data is a bit concerning.
While Nifty MNC index has managed to just stay above Nifty 50 when 3Y returns are considered since ~ Sep 2017. However, both funds have underperformed Nifty MNC. Only ABSL MNC Fund has outperformed NIfty 50 in this period. Too early to say anything based on this, but such periods can be quite frustrating for an investor.
Between ABSL MNC and UTI MNC, ABSL MNC fund is the winner but a little more volatility is the price to pay for excess returns
Video Version
Can we invest in MNC funds?
I just talked about “small exposure syndrome” (see video below) where investors have a little exposure of this and a little exposure of that and so on until their portfolio is a mess. So if you are thinking, “maybe I should have a little exposure to MNC funds” after reading this, then please do not!! I can only see three meaningful options here:
- Buy MNC stocks not funds. You can simply choose MNC stocks that part of both NIfty MNC and NIfty low volatility 30 (or 50) or from Nifty 100 Momentum, Low Volatility Stock Screener for March 2019. However, the allocation to MNCs and when to buy/sell will be up to you. However some large cap MNC stocks are reasonably safe long term bets either in the form of growth or regular dividends or both.
- Use MNC funds instead of large caps. This means significant exposure and reasoning that these funds have comparable volatility to NIfty 50 with a potential to beat it.
- Stay away from MNC funds and stick to diversified funds.
My feeling is that it would be better for an investor to buy MNC stocks separately (option 1) as it would result in better control, flexibility and lower expenses. Option 2 is not all unreasonable but if the fund underperforms Nifty for 2-3 years, it would be a frustrating, expensive proposition in addition to the concentration risk.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)