Exxon Mobil, Wal-Mart Stores, Royal Dutch Shell, BP and General Motors occupy the top slot in the latest FORTUNE’s Global 500 list of companies, and none of them are traded in Indian stock exchanges.
Among the Indian companies, Indian Oil ranks at 153rd place, followed by Reliance Industries at 342nd place. Mittal Steel is at 208th spot.
U.S houses headquarters of 170 Global 500 companies, Japan is home to 70 corporates and Britain and France are home to 38 companies each. In contrast India has only six entries.

In this era of globalization, what the above figure suggests is that as an investor, there are opportunities aplenty on the global front, and the only way an Indian investor can invest in these companies is through an internationally-oriented portfolio.

International funds which are very popular globally are yet to gain footholds in Indian markets, chiefly due to reasons like regulations and restrictions on foreign investment. But, it’s only a matter of time before the norms become friendlier and we see these kinds of funds making their presence felt; as of now, only Principal Global Opportunities Fund has investment in foreign securities. The advantages of a globally diversified portfolio come to the fore when local markets take a beating. Principal Global opportunities fund has generated returns of 1.10% when the category average has generated negative returns of 6.17%.

The advantage of a portfolio which spans investments across various markets is that it facilitates diversification. An India - oriented mutual fund scheme may be able to diversify across sectors and industries but a global fund can diversify across markets, which is obviously an added advantage as at any point of time, a particular market may be more attractive than others due to various factors.
Diversification helps in reducing risk, as spreading one’s assets over different stocks markets helps in combating volatility without sacrificing on returns.

The problem that an individual faces with respect to investing overseas is that the process is complex and costly. Although today’s sophisticated technology provides information, analysis, expert views all within the reach of the common investor - and has made the world that we live in truly a global village – but the process still remains cumbersome and something which a professional mutual fund unit is much better equipped to handle.

The importance of internationally-oriented funds assume more important in our times as the impact of US stock market on the international front certainly diminishes, and although the world markets are moving towards greater maturity , the low correlation between some of the emerging markets and developed markets is very low, providing an excellent case for diversification. Even otherwise, some of the market provides better value than other markets at a given point of time, for reasons like economic growth, political stability, etc.
Of course, with the growing trends towards gloablisation, dominated by multinational businesses – as represented by the fortune 500 list - the economies of the world are becoming more and more closely linked and interdependent. This means that different markets will tend to exhibit a higher correlation amongst each other. But, it might be a long time before major markets move in sync with each other.

The risks that these kind of funds undertake can be categorized into broadly three categories, firstly country-specific risk which is the risk posed by the country in which the investment are made due to factors like economic and political difficulties. Secondly, the market risk which may not be very well developed, inefficient, less regulated or may not provide adequate liquidity. Thirdly, the currency risk, is also a major threat, as the investment are made in the local currency, a appreciation of the domestic currency against the foreign currency in which the investment are made may lead to returns being adversely affected. These risk premiums have to be kept in mind before opting for these global funds.