Unlocking global markets: How to diversify with PMS

If you hit the MF overseas cap, portfolio management services could be your next global bet

- Anil Poste

With the mutual fund sector hitting market regulator Securities and Exchange Board of India's $7 billion overseas investment limit, one door has been shut for Indian investors looking for global diversification. But they have an alternative option of investing overseas through portfolio management services (PMS)—professionally managed funds with access to international markets.

This route requires investors to transfer funds via India's liberalised remittance scheme (LRS), under which individuals can remit up to $250,000 in a financial year for investments. The minimum ticket size for PMS funds is $75,000, or about 66 lakh.

Pramod Gubbi, co-founder, Marcellus Investment Managers, said Indian investors tend to have nearly 99% of their portfolios allocated within India due to a home-country bias, with minimal exposure to international markets, which can limit the potential for higher returns and better risk-management.

But as awareness grows, investors are slowly shifting towards a more balanced approach with overseas allocations, he said. "The right ratio depends on an individual's risk appetite and investment horizon, but global diversification is becoming increasingly essential for a well-rounded portfolio."

Geographical allocation Marcellus' Global Compounders Portfolio allocates about 75% of its corpus in the US, about 20% in Europe, and 5% in Canada, investing mainly in market leaders in key industries.

The US portion of the portfolio is primarily focused on industrials, which account for 39% of the allocation. Gubbi believes this sector is currently undervalued compared to technology, which makes up 26% of the portfolio. Financials have an 11.6% share, consumer discretionary holds 9.5%, and healthcare, 7.8%.