By investing in an Indian fund you are taking on not only the investment risk of the Indian stocks in which the fund invests, you are also exposing yourself to the fluctuations between Indian rupee and Sterling. If you invest in the fund you suggest, denominated in US$, you are adding a further variability in the form of fluctuations between US$ and Sterling.
Natalie Rizzi, Investment Director at Rathbones advises: There are some Indian Funds quoted in sterling but there will still be currency risk versus the rupee. When selecting a fund performance should be more important than the price currency. One has to accept currency risk when investing in overseas markets unless the fund has a hedging policy (the F&C does not). Thoughtful use of currency hedging can be used to boost or defend a fund's return. Recent currency volatility has seen hedged versus un-hedged currency become an important factor and, with investors increasingly opting to 'go global' and look for income in overseas investments, currency considerations are becoming an integral part of the investment strategy. In the longer term, one could argue that many currencies in emerging markets are likely to strengthen considerably against the sterling as their economies outperform the UK. In this case investors would get the double benefit of superior growth and a rising currency.
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