The first rule of investment mandates that you should never put all your eggs in one basket. It is imperative that you consider investing your money across different asset classes, as diversification helps reduce the overall impact of the market volatility on a portfolio. It is well known that equity investments can be an ideal vehicle for growth. However, even within equity investments, you have the choice to invest in different sectors, themes, and styles. A popular and evergreen choice here is the MNC names.
These MNC names are spread across sectors (consumer, automobiles, industrial manufacturing, metals, IT, cement and pharmaceuticals etc.) and are known for their superior corporate governance, robust balance sheet, strong brand, advanced technological edge and wide moat. Given all these attributes, investors typically tend to associate MNC names as quality and high dividend paying stocks.
Apart from these, MNCs given their strong brand and high cash nature tend to be an investor favourite during uncertain times. Owing to their strong balance sheet, MNCs have historically managed to tide over challenges across market cycles. This makes MNC funds a comparatively low-volatility thematic fund when compared to other categories of thematic funds.
Within the mutual fund space, there are multiple MNC based funds. These are thematic funds that invest in multi-national companies and, over the years, have shown strong and steady returns when compared with other thematic funds such as banking, technology, pharmaceuticals, etc. However, you are a unique individual with your own risk-return profile and asset allocation strategy. Learn more about MNC funds to decide whether they would fit well into your investment portfolio.
Things you need to know about MNC funds
Strong Credentials
Most MNC funds have historically delivered robust performance as they invest in companies which have strong credentials, including better standards of corporate governance, robust brand identities, and cash rich registers. Such companies exhibit better financials and are considered quality stocks, ensuring that their returns are consistent. This factor makes MNC funds a strong contender for your portfolio.
Apt for Large Portfolios
Considering the growth opportunities and weighing the risk inherent in MNC funds, these schemes are apt for investors who are keen on expanding their portfolios. Investors with large portfolios need to diversify their core investments and MNC funds can be the perfect option. While the core portion of the equity portfolio can be allocated to select large and mid-cap funds, MNC funds can become a part of the satellite portion. Usually, when investors park their corpus in similar schemes of different mutual fund houses, there is a risk of duplication, which could heighten the inherent risk in case of volatility. In such scenarios, investing in MNC funds is a good alternative as these schemes do not invest based on market caps of stocks.
MNC funds are especially well suited for volatile markets as these schemes invest in companies with strong profiles and proven track records. Further, since MNCs are active in multiple countries, they are largely shielded from geo-political volatility in a particular region. However, there are also some disadvantages to be considered before choosing to invest in these funds.
Options Available
Currently, there are four fund houses which offer MNC based funds. Of these four, the MNC fund offered by ICICI Prudential has some unique features which make it stand out of the pack. One of the standout features of ICICI Prudential MNC Fund is its ability to invest into foreign securities. I CICI Prudential MNC Fund broadly focuses on three approaches: Indian Multi-national Companies (Companies incorporated in India with business operations across globe, Multi-national Companies listed in India (Foreign Companies having business operations in India and listed on Indian Stock exchanges) and Global Multi-national Companies (Foreign Companies having business operations across globe but not listed on Indian Stock exchanges). As of August 2021, the portfolio has an exposure of 20% to international securities spread across sectors such as hardware, software, consumer non-durables and oil & petroleum products.
To conclude, MNC funds are a great way to diversify and gain exposure to international companies with proven track records.