MNC focused mutual funds: Should you invest?Like just a few years ago, even today when somebody looks for a job, finding employment with an ‘MNC’ is considered a great move. Multi-National Companies have a lot of advantages that plain-vanilla firms don’t. Global management, strong financial muscle of the parent and access to global technologies and benefits allow MNCs to grow big. In general, MNCs are great businesses, and so they should also be good investment. There are three MNC stock funds available to Indian mutual fund investors. All of them have long track-records with great performance. RupeeIQ tells you about these funds and throws the spotlight on each to help you decide.

Why MNC funds

MNCs are strong institutions. They are adept at performing well even in adverse market conditions. This reason alone makes them a sought-after property in the stock market. As a result, MNCs always enjoy premium valuations compared to other peers. The premium valuation is always maintained. Such valuations are supported by management quality, growth, finances, access to parent technology and accounting policies. In the last 5 and 10-year period, MNC funds, therefore, have done very well. In 5-year period, the average MNC fund return is 20%. In the 10 year period, the average MNC fund return is 22%, which is the highest among all categories.

Stocks MNC funds invest in

Fund managers have over the years gained confidence and stability from investments in MNCs. Such stocks are all-weather. Be it a bull market or a bear market, such stocks always do well. When chosen with care, such stocks can make a great portfolio. Since developing economies like India present tremendous opportunities for multinationals, these companies continue to make investments and grow the businesses.

RupeeIQ looked at the MNC stock universe to find out which stocks have found place in MNC fund portfolios. We saw stocks such as Honeywell Automation, Gillette, Pfizer, Bayer CropScience, Glaxosmithkline Pharma, Thomas Cook (India), ICRA, Johnson Controls – Hitachi, Bosch, HUL, Colgate-Palmolive, Grindwell Norton, Schaeffler India, P&G Hygiene, and Mphasis present in fund portfolios.

Fund spotlight

Aditya Birla Sun Life MNC Fund: Launched in 1994, this is the oldest MNC thematic fund. It has an asset size of Rs 3,344 crore. This fund exemplifies buy and hold strategy because the fund manager does not churn the portfolio much (portfolio turnover is just 4%). Year to date has been bad for the market. The fund has lost 13.6%, but its 5-year (20.6% CAGR) and 10-year performance (24% CAGR) is still great. The fund’s assets are inclined towards mid caps (62%). Its expense ratio is 2.37%, which is in line with funds.

SBI Magnum Global Fund – The fund was launched in September 1994. Similar to Aditya Birla Sun Life MNC Fund in size, SBI Magnum Global Fund has an asset size of Rs 3,387 crore. The fund manager recently has made key changes to the fund’s portfolio (portfolio turnover is 83%). The fund’s asset distribution across large, mid and small caps is better. About 40% of assets are in large cap stocks, 36% is in mid caps and 23% is in small caps. The fund has been hit in YTD, with NAV drop of 16%. But its MNC stock portfolio has ensured that 5-year (19% CAGR )and 10-year (21% CAGR) performance is still great. The fund’s expense ratio is 2.36%.

UTI MNC Fund – This fund is the ‘late comer’, since it was launched in 1998, more than 20 years ago. It has investor assets of more than Rs 2,000 crore. Like the Aditya Birla Sun Life MNC Fund, the fund manager of UTI MNC Fund does not seem to believe in changing the portfolio too much. This is evidenced by 7% portfolio turnover. This fund is more of a large-mid cap fund with large caps having 52% exposure and mid caps having 40% exposure; the rest is in small caps. Probably, this is the reason that UTI MNC Fund has fallen the least in 2018 YTD period compared to peers. Its 5-year (19% CAGR) and 10-year (22%) performance sheet looks impressive. Like all the MNC funds, the UTI MNC Fund has had no problems beating its benchmark over the long-term.

Fund Name 1-month % 3-month % 1-year % 3-year % 5-year % 10-year %
SBI Magnum Global Fund -3.96 -8.64 -2.88 5.07 18.61 21.35
UTI MNC Fund – Regular Plan -6 -9.95 -1.54 5.63 19.03 21.88
Aditya Birla Sun Life MNC Fund -6.67 -10.67 -4.23 4.97 20.69 24.05
NAV as on Oct 29, 2018