FACEBOOK, TWITTER, MICROSOFT AND AMAZON—the bigwigs of the tech world have been on a firing spree. Twitter has laid off 50% employees. Facebook has fired 11,000. Amazon and Microsoft are not far behind. All is not well with global big tech firms after phenomenal growth following Covid-19 outbreak, a performance that built massive euphoria around global investing, especially in technology stocks. Assets under management (AUM) of fund of funds investing overseas jumped a whopping 709% from '2,734.36 crore in March 2020 to '22,127.60 crore in January 2022.

The MF industry cannot invest more than $7 billion in global securities—a limit specified by Reserve Bank of India (RBI) to check drain on forex reserves. The respective fund house limit is $1 billion. With fund houses reaching industry ceiling, Sebi prohibited them from accepting fresh inflows from February 2. Did this mark the end of the road for global investing by Indians? Should you avoid global diversification at this stage, especially when majority of stock markets across the world, including the biggest ones in U.S., have been under pressure for several quarters and India has been a standout performer? A vehement no!

Most AMCs have started accepting fresh inflows. Moreover, global markets are trading at attractive valuations after falling sharply in 2022. Though the euphoria of the 2020-2021 period is missing, this is precisely the reason it may be a good time to go global.

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With rupee depreciating sharply against the dollar, RBI is unlikely to revise global investment limits soon. However, a crash in global markets post Russia-Ukraine war and subsequent redemptions from international schemes made Sebi open the window for fresh inflows in June with a caveat that no fund house would breach its February 1 exposure. Most funds have started accepting fresh money now. Nishant Batra, chief goal planner at Holistic Prime Wealth, says, "Except for schemes from Mirae, all schemes from DSP, Edelweiss, PGIM and ICICI are open for subscription. Even Motilal Oswal AMC has started accepting funds. They are only accepting lumpsum up to '2 lakh per month. Systematic investments are restricted," he says.

Interestingly, there is a separate limit of $1 billion for exposure to global ETFs through fund of funds or ETF route. The fund house limit is $300 million. "Currently, a few fund of funds, which have ETFs domiciled outside India as underlying, are open for subscription. Examples are Kotak Nasdaq 100 FOF, Invesco India Nasdaq 100 ETF FOF and ABSL Nasdaq 100 ETF FOF," says Batra.

Alternatively, if you have a demat account, you may consider the ETF version of fund of funds. "While the fund of fund option is more convenient, it is more expensive than buying an ETF on a foreign exchange. When you buy a fund of fund, you are not only paying for the underlying ETF but also additional expenses the mutual fund incurs for running the scheme in India," says Vaibhav Porwal, co-founder, Dezerv.

Moreover, ETFs should reflect returns of their underlying indices, but illiquid nature of such ETFs in India makes them a risky proposition. "In ETFs, iNAV and traded price can be vastly different. A few months back, Motilal Nasdaq 100 ETF was trading at 10% premium to iNAV. This means investors will earn 10% less than the underlying index," says Batra.

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