Investing in International Assets – The Rationale & Recommended Routes

Rationale for Investing in International Assets

Having some part of your investment portfolio allocated to international assets, have very strong diversification benefits from a portfolio construction perspective. We provide below some of the core reasons why we believe having exposure to international assets have clear benefits from a portfolio construction perspective:

Benefits of International Investing


Regardless of how diversified your fund portfolio is in terms of categories, it can still have a 100% concentration to growth of a single economy (Level 4). There are many factors (wars, geopolitical, political, currency) that can have a large adverse impact on a single economy. Adding geographical diversification to your portfolio, helps reduce single country-risk.

Exposures to specific global trends

There are various trends that drive longer-term economic growth, and these factors tend to differ across economies. Investing internationally can provide you exposure to specific value-creating trends (such as semi-conductors, EVs, global tech firms etc) where strong investment options are not available in India. 

Currency Diversification

For many families, there may be certain expenses that are expected to take place in global currencies (overseas education for children, international vacations, overseas retirement etc.). A sharp depreciation of the rupee can adversely impact the ability to meet such forex expenses. Investing overseas gives you exposure to foreign currency assets, protecting your portfolio & financial goals against substantial rupee depreciation. 

Larger-range of Investment Options

Investing is the art of balancing growth, quality & valuations. Each global market trades at different valuations, based on respective growth outlooks. Investing overseas opens up a range of more attractively valued markets or markets/specific themes with a higher growth potential. 

Different Options for International Investing

There are many different options for investing overseas, each of which have their own set of pros & cons. We provide below a brief overview of each of these investment options, and their level of suitability for different types of investors. 

Option 1) India-based International Feeder-Funds

International feeder funds in India, are essentially India-based mutual funds that invest exclusively in international assets (overseas ETFs/MFs/securities). You get all of the benefits of international asset exposures (investments in overseas assets & currency diversification), without any of the operational complexities of other options.

Option 2) Direct Investing Overseas via Overseas Brokers

Many Indian brokers have launched an option for their investors, to invest directly in overseas securities via a tie-up with an international broker (typically Interactive Brokers or Stockal in the US). The Indian brokers are basically facilitators to help you open an overseas brokerage account. 

Option 3) Using International Fund Structures to directly invest overseas

There exist a wide-range of international fund/trust/company structures, that allow you to invest in overseas assets via a perpetual legal entity (avoiding exposures to estate taxes) in a jurisdiction with minimal tax & compliance implications. This is clearly the best route for investors seeking to invest directly overseas, but it does have cost implications that typically make it viable only for larger investment sizes (minimum of $5 mn).