Why MNC Funds are underperforming? Reasons for MNC Fund’s Underperformance￼3 min read
A Multinational Corporation (MNC) is a company that has its facilities, plants, and other assets in a country other than its home country or the country that it is incorporated and MNC funds that invest only in MNCs. Earlier there was only 3 MNC fund but recently a new fund is also added, so currently, there is 4 MNC fund. The asset under management of this MNC fund amounts to Rs. 10,000 crores. Hence, in this article we will be discussing Why does MNC funds are underperforming currently and how MNC Funds have performed in the last 1 year.
These are the following 4 MNC funds.
- ICICI Pru MNC fund.
- SBI Magnum global fund.
- Aditya Birla SL MNC fund.
- UTI MNC fund.
- Performance in the last few years has not been good some of the funds are doing good and some are not, and the definitions of MNC companies adopted by these funds are different.
- Compared all the four funds with the return of the S&P BSE Sensex index-TRI every fund has underperformed except the ICICI Pru MNC fund in the last year.
- In 3 years also ICICI Pru MNC fund has given the best performance and Sensex is on 3rd number but when compared in 5 years then Sensex has beaten every other fund.
- The reason could be that the valuation of MNC has always been on the higher side as compared to domestic companies which are undervalued mostly.
- MNC is more aggressive and is mostly not in export but Indian companies play domestic and export quite well. So the growth opportunity for domestic companies has played well.
- When NIFTY MNC is compared to NIFTY 50, it has also not performed well, and after 2021, growth in NIFTY Index was good but in the case of MNC, it has not performed well.
Analysis of the performance of each fund: –
- It has given a return of 23% in the last 1 year which is considered as good.
- The stocks under ICICI are mainly Indian-origin MNC for example Lupin, Dr. Reddy’s Laboratories, Maruti Suzuki India, etc.
- It has given a return of 6.23% only in the last 1 year, which is very bad.
- It contains the stocks which are pure MNC for example ICRA, Gillette India, Bata India, etc.
- It has given a return of 15.75% in the last 1 year which is considered as good.
- The stocks under ICICI are mainly Indian-origin MNC for example Divi’s Laboratories, HCL Technologies, etc.
- It recently added the US stocks like Alphabet Inc. and NetFlix Inc.
- It has given a return of 13.14% only in the last 1 year, which is very bad.
- It contains the stocks which are pure MNC for example United Spirits, Ambhuja Cement, Abbot India, etc.
- The definition of MNC for each of these funds are varying and hold different sets of stock, whereas Aditya Birla SL MNC Fund and UTI MNC Fund are of a similar kind, and holds similar kind of stocks.
What should investors do?
Selection of the stocks plays a very important role in any fund. MNC theme is relatively conservation and less risky. Investors can decide according to their risk-taking appetites along with their return expectations.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.