In this article, Abhishek Kumar, a SEBI-registered investment advisor, discusses whether one should invest in the retail offshore MF from GIFT City, specifically the DSP Global Equity Fund.
About the author: Abhishek is part of a freefincal’s curated list of fee-only financial advisors and a fee-only India member. He can be contacted via his website, sahajmoney.com.
I still remember being 11 years old when India opened its economy and the then Finance Minister, late Dr. Manmohan Singh, presented the Union Budget and announced it to the world. What didn’t change was the capital account control—in other words, money flowing in and out of India still requires RBI approval. In technical terms, this means that the Indian Rupee (INR) is partially convertible.
You may wonder why this historical context is important when trying to understand a new Global Equity Fund launched by DSP. This is because domestic investors have been finding it difficult to invest in international markets through mutual funds based in India, as these funds have reached their limits for transferring funds out of India due to capital account controls imposed by the RBI. Therefore, when a fund offers domestic investors the opportunity to invest outside India through a mutual fund, it’s worth exploring this option.
India is Important—But It Is Only One Street in a Vast Global City
These capital controls have inadvertently kept Indian investors focused on domestic markets, but here’s the bigger picture: scroll through any global market map and you’ll see a striking statistic—India makes up just 3–4 per cent of the world’s listed equity wealth. Putting every investment rupee at home is like running a shop in Mumbai and refusing to serve the 95 per cent of customers walking past from the rest of the planet.
Global stocks move to different tunes—Fed policy in Washington, factory output in Seoul, luxury sales in Paris. When one stumbles, another keeps playing. That’s what investing in lowly or negatively correlated assets or countries helps accomplish for an investor. It helps reduce country risk. Residual risks that impact all countries in a globally connected market would remain, but one can certainly reduce country-related risk by investing outside their home country.
The Silent Killer Called the Rupee-Dollar Gap
A second consequence of liberalisation was that the conversion of the Indian Rupee into US Dollars (USD) became linked, with some limits due to capital control by the RBI, to market forces instead of an artificially pegged value. One aftermath of liberalization of our economy is that the value of INR was devalued to bring it to a reasonable level compared to major currencies like USD. To this day, due to various factors, the INR has historically depreciated against major currencies, particularly the USD.
You can either resist this trend or benefit from it. Dollar-denominated assets such as shares of Apple, Toyota, or Tencent carry an invisible hedge. When the rupee weakens, their value in INR rises, helping you keep pace with your future bills.
Why This Fund Changes Everything for Domestic Investors
To convert currency risk into an advantage, investors can turn to innovative solutions like the DSP Global Equity Fund. Until recently, domestic retail investors had two options to invest in international stocks: through overseas mutual funds that stop fund inflows when RBI’s sector-wide dollar quota gets exhausted, or through direct stock accounts with foreign brokers that come with complex KYC and the fear of sudden platform shutdowns. Both came with significant frictions.
The DSP Global Equity Fund changes that equation. Housed in GIFT City and regulated by the International Financial Services Centres Authority (IFSCA), the fund operates outside the industry-wide ceiling imposed by RBI that restricts fund inflows in most India-based global schemes. Think of GIFT City as a type of Special Economic Zone (SEZ) where companies have lenient capital account controls so that they can bring money from outside India or send money outside to other foreign countries easily.
Three Key Features That Matter
- Low investment threshold of $5,000 (about ₹4.2 lakh)
- Flexible redemption: You can buy or redeem units on any working day; sell within 12 months and you pay a 1 percent exit fee, after that nothing
- Transparent fee structure: A flat annual expense of 1.50 percent in the direct plan (even lower above $100k) and no performance fee, so you keep every extra rupee of upside
What’s the Investment Strategy Behind This Fund?
Beyond fees and access, the portfolio approach determines long-term success. According to the scheme document, the fund has these strategic features:
- Portfolio concentration: It invests in 30 to 50 stocks so that it’s small enough for each holding to matter, but big enough to stay diversified
- Market cap focus: It typically invests in firms with $30 billion-plus market capitalisation
- Selection criteria: The filter criteria used to identify prospective stocks include companies that have shown 6 to 7 per cent annual earnings growth, healthy cash returns, and sensible leverage; banks, tobacco, and pure gambling names are excluded
- Price discipline: The managers wait for at least a 30–40 per cent discount to fair value before buying
How Can I Invest in This Fund?
With the mechanics in place, here’s how you can access this opportunity in three simple steps:
- Open an account with a quick KYC through CAMS in GIFT City
- Remit dollars from your bank under the Liberalised Remittance Scheme (you have a $250,000 annual headroom per PAN)
- Receive units and a daily NAV statement; redeem whenever life demands it
Conclusion
It’s vital to ask why global diversification matters in the first place. Metrics reveal potential, context clarifies purpose. Diversifying abroad is not about chasing the latest trend; it is about knowing that currency swings won’t turn your goals into worries. It is about sitting at the dining table during a market crash and reminding your family, “Our future isn’t tied to one country’s monsoon or one Budget speech.”
So if your financial goals involve planned spending in foreign currency such as education, travel, or even the simple desire to insulate wealth by reducing country-specific concentration risk, then such funds listed in GIFT City do provide you an opportunity to diversify your investment. But given the recency of this setup, there are only a limited number of funds that provide this opportunity, so do factor it into your investment plan so that you don’t end up doing it in desperation but should rather do it when you have multiple options with past performance data to rely on before taking the plunge.
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