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I live in India, and want to diversify into the foreign equity market, via a mutual fund offered in India. But I don't want to take on the currency risk. In some countries, funds are offered that hedge the forex risk, so you can assume that the FX rate remains the same as it was on the day of investment. But I couldn't find any such fund in India. Are there any?

And, even if it exists, how safe are they? Have there been cases where people got a worse exchange rate than was promised, when they liquidated their investments years or decades down the line, because of counterparty risk?

This is not a solicitation for a product or service recommendation. I'm not asking, "Which fund should I use?" Rather, I'm asking if such a fund even exists in India.

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No there aren't any such funds.

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There aren't and for a good reason. The long term trend of INR against USD, GBP, EUR and other harder currencies is down. Given the inflation differential between these economies and India's, fund managers and investors should expect this to continue.

Therefore, if you are invested for any reasonable length of time, you would expect the forex movements to add to your returns. Historically, this has been true of international funds run in India.

  • I don't mind a guarantee that I'll get back at least ₹66 to the dollar, assuming $1 = ₹66 on the date of investment The risk I'm trying to hedge against is that I'll get LESS in rupees when I finally redeem my investments, because the rupee appreciated. – Vaddadi Kartick Nov 24 '15 at 16:13

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