Invest in these three themes while putting your money overseas: Sadaf Behbahany

New Delhi: The appetite of Indian investors for looking in global opportunities has risen over the years. India is approximately 5 per cent of world economic activity as measured by GDP.

Market participants are awaiting Sebi's approval for raising the overseas investment limit for the Indian mutual fund industry.

Offshore assets under management with Indian mutual funds have grown from Rs 5.5 lakh crores in 2008 to Rs 38.94 lakh crores (the upper limit being $7 billion) in January 2022.

Sadaf Behbahany, Managing Director, Global Wealth Advisory, Waterfield Advisors said that to decide the overall asset allocation mix for an Indian investor's global portfolio, it is primarily important to understand the overall risk profile and quantum of assets.

The investment can be done through rupee-denominated mutual fund investments or as foreign currency through the Liberalised Remittance Scheme (LRS), she added.


The thumb rule one may consider is to invest 10-15% of the overall investment portfolio in global markets ex-home country, said the global market expert.

"It might be worth noting that 95 per cent of economic activity globally happens outside of India – so having a proportion of a portfolio that may seem “high” or “risky” to domestically focused investors may actually be more prudent than upon first consideration," she said.

However, the portfolio could be diversified across fixed income, equities and alternate liquid assets like REITs or illiquid assets like private equity investments, after examining the application of Foreign Exchange Management Act (FEMA) restrictions.

"Fixed income is not usually attractive for Indian investors as we cannot leverage the portfolio and hence returns may seem muted or comparable to fixed income returns in India, keeping in mind the currency depreciation," said Behbahany.

"Most investors, while putting money in global markets, focus on equities either directly or through active and passive funds," she added.

Indians are becoming global citizens, thanks to increasing wealth, easy process and rampant globalisation. The pandemic further encouraged Indian families to consider the residential options overseas to relocate.

A large part of GenNext completing their primary or secondary education in international schools and colleges has further led family-owned businesses to expand their global aspirations to suit the needs of this generation.

"Diversifying away from home bias, the outperformance of global markets in comparison to Indian markets, depreciation of the rupee and FEMA restrictions in remittances are reasons to build a well-diversified global portfolio," Behbahany said.

Few topics cleave a room full of investors and global money managers, one being the evergreen red hot topic for debate active versus passive investment

Market stalwarts like Jim Rogers, have said that most successful investors in fact do nothing most of the time and are big believers in passive or index investing.

For the next 3-5 years, Behbahany is optimistic about growth trends transforming human lives. She has penned down three key themes --- intelligent machines (the combination of artificial intelligence and robotics), the rollout of 5G, and genetic science and biotechnology.

"Even if global growth is slow by historical standards over the next few years, there are a few industries we know will continue to expand because they are being driven by technological change," she said.

Each one of these key themes will change the way people live by making lives easier, faster, and healthier, the market expert said with a belief that there will be many investment opportunities in these themes over the next 3-5 years.


"It is ideal for a long-term investor to follow a core and satellite strategy, for global investments wherein you bring diversification across geographies, asset allocation and market caps through index investing which largely should be 70-80% of the portfolio," she suggested.

In the last 10 years, S&P 500 has returned 14.50 per cent return in the dollar terms. MSCI All Country World Index has returned a 9.78 per cent, where the US accounts for weightage on the index.

"While constructing portfolios it is important to allocate across geographies as no single geography has consistently outperformed year on year," said Behbahany.


Long-term history has seen equities, on average, return approximately 10 per cent a year with significant periods of above and below-average returns. The prior five years have been good years for global stocks, with an average annualized return for the MSCI ACWI since 2016 of 14.6 per cent, she said.

"The next five years could see more muted returns as companies adjust to an environment in much of the world where the cost of borrowing set by central bank policy makers will likely increase," she cautioned, despite being optimistic about global investing.

Rising consumption from global middle-class consumers, technological innovation and positive demographics in much of the world should help select companies prosper even if the macro picture is less favourable overall.

On top of the fees and the uncertainty of outperformance, Indian investors have another hoop to jump through when investing in global strategies: taxation. "Indian tax residents are taxed on their Global income and hence it’s important to stay invested for 3+ years to benefit from lower rates on long term capital gains," Sadaf Behbahany said.