Most international equity funds fail to beat the S&P 500 TR (INR)

Published: July 28, 2021 at 8:02 am

In this article, we compare the performance of international equity mutual funds (based in India and available for the retail Indian investor) with the S&P 500 Total Return in INR over the last one, two and three years as of July 23rd 2021.

If we exclude the international index funds tracking the Nasdaq 100 and S& P 500 (we shall discuss their tracking errors in the next article), we have a total of 35 funds that are at least one year old and 33 funds which are at least 2/3 years old.

  • Only 5 out of 35 funds outperformed the S&P 500 TR INR over the last year
  • Only 8 out of 33 funds outperformed the S&P 500 TR INR over the last two years
  • Only 5 out of 33 funds outperformed the S&P 500 TR INR over the last three years

However, some funds in this list are sector-specific (eg. DSP World Mining Fund, ABSL Agri Fund) or geography-specific (eg. funds investing in Euro, China, Brazil, emerging economies etc) and it would not be fair to compare them to the S&P 500.

If we eliminate them, we have a total of 19 funds that are at least one year old and 17 funds that are at least 2/3 years old.

  • Only 3 out of 19 funds outperformed the S&P 500 TR INR over the last year
  • Only 6 out of 17 funds outperformed the S&P 500 TR INR over the last two years
  • Only 4 out of 17 funds outperformed the S&P 500 TR INR over the last three years.

The full list is given below. The benchmark return is indicated in bold. The table is sorted in descending 3Y returns. Returns for the NASDAQ 100 TR INR (an appropriate benchmark for some funds like PGIM Global) is also indicated.


Scheme Name1 Year2 Years3 Years
PGIM India Global Equity Opp Fund(G)-Direct Plan33.040.732.4
Franklin India Feeder – Franklin U.S. Opportunities Fund(G)-Direct Plan37.136.026.6
Nippon India US Equity Opp Fund(G)-Direct Plan35.927.822.9
ICICI Pru US Bluechip Equity Fund(G)-Direct Plan36.728.622.6
S&P 500 TRI INR

(NASDAQ 100 TRI INR)

37.8

(43.2)

27.8

(43.9)

21.3

(31.4)

DSP US Flexible Equity Fund(G)-Direct Plan36.128.019.0
Aditya Birla SL Global Emerging Opp Fund(G)-Direct Plan29.627.916.3
Sundaram Global Brand Fund(G)-Direct Plan34.624.115.8
Principal Global Opportunities Fund(G)-Direct Plan44.226.515.1
Aditya Birla SL Intl. Equity Fund-A(G)-Direct Plan25.420.014.9
Edelweiss US Value Equity Offshore Fund(G)-Direct Plan36.320.514.8
HSBC Global Emerging Markets Fund(G)-Direct Plan23.621.013.6
DSP Global Allocation Fund(G)-Direct Plan18.619.613.5
Aditya Birla SL Intl. Equity Fund-B(G)-Direct Plan53.722.713.4
ICICI Pru Global Stable Equity Fund(FOF)(G)-Direct Plan26.317.512.9
Kotak Global Emerging Mkt Fund(G)-Direct Plan26.621.512.5
Invesco India Feeder – Invesco Global Equity Income Fund(G)-Direct Plan33.918.411.1
Aditya Birla SL Global Excellence Equity FoF(G)-Direct Plan33.210.58.7
Edelweiss US Technology Equity FOF-(G)-Direct Plan44.5
ICICI Pru Global Advantage Fund(FOF)(G)-Direct Plan22.8

What does this mean for investors?

Investors should not rush to invest in the outperformers on this list! They are unlikely to keep that status for long! We have seen this happen again and again in our reviews:

Be it a fund of fund investing in a foreign actively managed fund (domiciled in Luxembourg!) or a locally managed active fund (eg. US Bluechip Equity), consistently beating the S&P 500  or the NASDAQ 100 is quite difficult.

On top of it, there is the TER chared for a fund of fund. It is nothing short of atrocious that the direct plan of the fund of fund charges an additional TER comparable to that of the underlying active fund. The regular plan charges an additional TER of about 2X of the underlying fund. So if the lack of performance does not result in less than benchmark returns, the expenses will ensure it.

Therefore investors seeking “international diversification” (in most cases this is just recency bias, not a portfolio management tactic) are better off with Motilal Oswal S&P 500 Index Fund (click the link to check what returns to expect). This fund remains the most reasonable option to invest in the US/international market (without the concentration risk and volatility of the Nasdaq 100 ETF or FOF from the same AMC). In the next article, we shall discuss the tracking error of both these passive investing options.

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