A fund manager in the US has told investors to invest in a global index fund as the country continues to grow its emerging markets economy.
India, China, Indonesia, Brazil, South Africa, Argentina and the UK have all emerged from the global recession in recent years, and their economies are expected to grow by 5 per cent this year.
Investors in these countries are now buying ETFs which track their countries’ markets, often using the index fund, the TSP F fund, to make their investments.
The index funds are designed to track the performance of emerging markets economies, and can make money by trading at a lower price than other mutual funds, but investors have been complaining of low returns.
India is India’s largest market, and investors there have been buying the funds since at least 2011, according to data compiled by Bloomberg.
In 2016, the fund manager told investors that he expects the fund to earn 5 per “c” per year.
In 2017, the same fund manager said it would earn 7 per “a” and in 2018, it would make 7 per cent.
Investor commentsThe Indian fund manager, who asked to remain anonymous, said in an interview that investors are using the fund because of the “low cost” and that “there’s no reason to wait”.
India is the second largest fund investor after the US, after the UK, with about $100 billion in market capitalisation.
In India, investors have also bought funds for India’s manufacturing sector, including the Tata Steel Corp, which has seen its share prices plummet due to the global slowdown.
In September, Tata Steel’s shares plunged after a government probe into alleged corruption in the steel industry uncovered a deal that could have seen the steelmaker buy back shares of its competitor, which Tata Steel was building.
A report by the country’s auditor general said in December that Tata Steel and other major steel companies paid bribes in exchange for steel contracts.
Investments in the index funds have fallen by about a third this year, to about $3.5 billion, according, data compiled in March by Bloomberg, citing the fund’s director, Rahul Gupta.
The fund is expected to make between 5 per and 7 per cents on each trade in the year, Gupta said.
Investment advisers in the Indian market have been trying to boost the value of their portfolios with funds like the S&P 500 Index Fund.
Investors have been waiting for a global ETF to offer a better return than mutual funds in a market dominated by the US index funds, said Vijay Gupta, an investment adviser in Mumbai.
Investing in a fund based on emerging markets is still a niche, but there is a lot of room for growth in the market, Gupta added.