Which Mutual Fund is Best for NRIs?

What are Mutual Funds for NRI/ OCI/ PIO?

Mutual funds are investment vehicles that allow Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs) to pool their money with other investors to invest in a diversified portfolio of stocks, bonds, or other securities.

These funds are managed by professional fund managers and offer the following opportunities to the NRIs:

• To participate in the Indian financial markets

• To diversify your investments

• To earn potential returns

The fund managers ensure compliance with relevant regulations and guidelines for foreign investors.

Mutual funds cater to the unique investment needs and preferences of NRIs, making them an attractive option for wealth creation and financial planning.

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5 Best Mutual Funds for NRI/ OCI/ PIOs to Invest in 2023

Details of Best Mutual Funds to Invest in India for NRI/ OCI/ PIOs

1. ICICI Prudential US Bluechip Equity Fund

   ICICI Prudential US Bluechip Equity Direct Plan-Growth is an international mutual fund scheme managed by ICICI Prudential Mutual Fund. As of June 30, 2023, it manages assets worth ₹2,828 crores, making it a medium-sized fund within its category. It's important to note that this fund carries an expense ratio of 1.1%, which is relatively higher compared to most other international funds.

   Features of ICICI Prudential US Bluechip Equity Fund:

   • Launched On: January 01, 2013

   • AUM: Rs. 2,828 crores (as of June 30, 2023)

   • Expense Ratio: 2.06% 

   • Investment Objective: To provide long-term capital appreciation to investors by investing in equity and equity-related securities of companies listed on recognized stock exchanges in the United States of America.

   • Fund Exposure: The majority of the fund's portfolio is allocated to sectors such as Financials, Services, Healthcare, Technology, and Capital Goods. The fund has opted for a relatively lower exposure to the Financials and Services sectors compared to other funds in the same category.

   • Top 5 Holdings: Tyler Technologies Inc., Veeva Systems Inc., TransUnion, Alphabet Inc Class C, and The Walt Disney Company.

2. DSP World Mining Fund

   DSP World Mining Fund is an open-ended equity fund that invests in companies engaged in the exploration, production, processing, and distribution of minerals and metals. It is a global fund, which means that it can invest in companies anywhere in the world. However, it has a focus on investing in companies in developed countries.

   Features of DSP World Mining Fund:

   • Launched On: December 29 2009

   • AUM: Rs. 178 crores

   • Expense Ratio: 1.51%

   • Benchmark Index: MCSI ACWI Metals and Mining 30% Buffer 10/40 (1994) Net TRI

   • Expense Ratio: 2.16% (as declared on August 31 2023)

   • Primary Objective: 

     • To achieve capital appreciation primarily by investing in units of the BlackRock Global Funds – World Mining Fund. 

     • To ensure liquidity for potential needs, the Scheme may allocate a portion of its assets into money market securities or units of money market/liquid schemes offered by DSP BlackRock Mutual Fund. 

     • The Scheme has the flexibility to allocate a substantial portion of its assets into units of comparable international mutual fund schemes.

   • Long-term Growth Potential: The mining sector is cyclical, but it has the potential to generate strong returns over the long term. This is because demand for minerals and metals is expected to grow in the coming years as the global economy expands.

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3. Nippon India US Equity Opportunities Fund

   Nippon India US Equity Opportunities Fund is an open-ended equity fund that invests in equity and equity-related securities of companies listed on recognized stock exchanges in the United States of America.

   Features of Nippon India US Equity Opportunities Fund:

   • Launched On: July 03 2015

   • AUM: Rs. 602 crores

   • Expense Ratio: 1.27%

   • Benchmark Index: S&P 500 TRI

   • Fund Objective: To achieve long-term capital growth for investors by focusing primarily on investing in equity and equity-related securities of companies listed on recognized US stock exchanges. The remaining portion of the investment is allocated to debt and money market securities in India.

   • Fund Portfolio: Services, Technology, Healthcare, Financials, and Capital Goods

   • Top 5 Holdings: Alphabet Inc Class A, Amazon.com Inc. (USA), Iqvia Holdings, Microsoft Corporation (US), and Booking Holdings Inc.

4. DSP US Flexible Equity Fund

   DSP US Flexible Equity Fund is an open-ended equity fund that invests in equity and equity-related securities of companies listed on recognized stock exchanges in the United States of America. The fund's investment objective is to generate long-term capital appreciation to investors.

   Features of DSP US Flexible Equity Fund:

   • Launched On: January 01 2013

   • AUM: Rs. 788 crores

   • Benchmark: Russell 1000

   • Expense Ratio: 1.53%

   • Investment objective: To attain capital growth primarily by investing in units of the BlackRock Global Funds US Flexible Equity Fund. Additionally, the Scheme has the flexibility to invest in units of similar overseas mutual fund schemes.

   • Fund Portfolio: The fund's portfolio predominantly consists of investments in Unclassified sectors. This fund allocates a smaller portion of its assets to Unclassified sectors compared to its peers within the same category. 

   • Top 5 Holdings: The top 5 holdings in the fund's portfolio are in BlackRock Global Funds - US Flexible Equity Fund.

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5. Franklin India Feeder Franklin US Opportunities Direct Fund - Growth

   Franklin India Feeder Franklin US Opportunities Direct Fund - Growth is an open-ended equity fund of funds scheme that invests in units of Franklin U.S. Opportunities Fund (Target Fund). The Target Fund is a US-based mutual fund that invests in US companies across a variety of sectors and industries.

   Features of Franklin India Feeder Franklin US Opportunities Direct Fund:

   • Launched On: January 01 2023

   • AUM: Rs. 3,286 crores

   • Benchmark: Russell 3000 Growth

   • Expense Ratio: 0.55%

   • Investment Objective: To attain capital growth primarily by investing in units of the BlackRock Global Funds US Flexible Equity Fund. Additionally, the Scheme has the flexibility to invest in units of similar overseas mutual fund schemes.

   • Fund Portfolio: The fund's portfolio primarily includes investments in unclassified sectors. This fund has chosen to allocate a smaller portion of its assets to unclassified sectors.

   • Top 5 Holdings: The top 5 holdings in the fund's portfolio are within Franklin India Feeder Franklin US Opportunities Fund.

Mutual Fund Laws and Regulations for NRI/ OCI/ PIOs

Investing in mutual funds in India are subject to specific laws and regulations for Non-Resident Indians (NRIs). Here are some key points regarding these regulations:

• Eligibility: NRIs, as well as Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs), are eligible to invest in Indian mutual funds.

• KYC Compliance: NRIs must complete the Know Your Customer (KYC) process, which involves providing necessary documents, such as identity proof, address proof, and a passport-sized photograph.

• Repatriation: NRIs can invest in both repatriable and non-repatriable mutual fund schemes. Repatriable funds can be transferred back to the foreign account of the NRI, while non-repatriable funds cannot be repatriated abroad without certain restrictions.

• Currency: Investment can be made in Indian Rupees (INR) or foreign currency, depending on the specific mutual fund scheme.

• NRE/NRO Accounts: An NRI can use the Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts to invest in Indian mutual funds. NRE accounts are used for repatriable investments, while NRO accounts are for non-repatriable investments.

• Taxation: Tax rules vary depending on the type of mutual fund and the investor's residential status. Capital gains tax, dividend distribution tax, and other income tax laws may apply.

• PAN (Permanent Account Number): NRIs must obtain a PAN card in India for tax purposes. It is essential for mutual fund investments.

• FEMA Regulations: The Foreign Exchange Management Act (FEMA) governs foreign investments in India, including mutual funds. NRIs must comply with FEMA regulations when investing.

• Nomination: NRIs are encouraged to nominate a nominee for the mutual fund investments. This simplifies the transfer of investments in case of the investor's demise.

• RBI and SEBI Regulations: Investments are subject to regulations issued by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).

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Challenges to Investments in India for NRIs in USA/ Canada

Indian mutual fund houses encounter significant problems when trying to attract investments from Non-Resident Indians (NRIs) based in the United States and Canada. First, let us understand this law here:

FATCA (Foreign Account Tax Compliance Act)

• This is a United States federal law that imposes rigorous reporting requirements on foreign financial institutions, including Indian mutual fund houses.

• Compliance with FATCA necessitates extensive documentation and meticulous reporting to the Internal Revenue Service (IRS), making it a complex and resource-intensive process.

• This documentation includes their US Taxpayer Identification Number (TIN) or their Global Intermediary Identification Number (GIIN).

Challenges for US and Canadian NRIs:

US and Canadian NRIs may face the following challenges when investing in Indian mutual funds:

• Difficulty in obtaining a FATCA TIN or GIIN

• Lack of awareness of FATCA requirements

• The reluctance of mutual fund houses to accept FATCA investors

Mutual Fund Houses that Allow NRI/ OCI/ PIOs in USA/ Canada to Invest in India

List of mutual fund houses in India that accept FATCA investors:

• Sundaram Mutual Fund

• L&T Mutual Fund

• UTI Mutual Fund

• Aditya Birla Sun Life Mutual Fund

• Navi Mutual Fund

• ICICI Prudential Mutual Fund

• SBI Mutual Fund

• Nippon India Mutual Funds

• UTI Mutual Fund

• Navi Mutual Fund

• PPFAS Mutual Fund

• Axis Mutual Fund

• Aditya Birla Sun Life Mutual Fund

• SBI Mutual Fund

• ICICI Prudential Mutual Fund

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Summing It Up

For NRIs, OCIs, and PIOs looking to invest in India, the best mutual funds are those that align with their financial goals, risk tolerance, and investment horizon. Diversified equity funds, balanced funds, and international funds can offer attractive opportunities, but it is essential to conduct thorough research, consider professional advice, and ensure compliance with regulatory requirements before making investment decisions. Tailoring investments to individual circumstances is key to building a successful mutual fund portfolio in India.