Marcellus Investment Managers suggests strategic global diversification for Indian investors, shifting focus from US AI boom to cheaper European markets.

Arindam Mandal, Head of Global Equities at Marcellus Investment Managers, shared insights on global investment strategies in an interview. He highlighted that his fund, the Global Compounders Fund with ₹300 crore AUM as of October end, has tilted its portfolio away from the lopsided AI-driven valuations seen in the US market. Instead, they are looking for good companies with some cyclical issues that trade at much cheaper multiples, focusing on long-term growth rather than immediate catalysts. The fund avoids pricey mega-caps like NVIDIA and Tesla, focusing on developed markets in the US and Europe.

Mandal sees potential value in Europe, citing GE Aerospace and its European JV Safran, which trades at a significant discount. Regarding emerging markets, he believes comparing China and India directly is unfair due to different return profiles, with India historically deserving a premium over China. While India's small and mid-cap segments are trading higher than their long-term median, large caps are fine, and China is in line with its historical average.

He stressed that for Indian investors, strategic allocation to global markets is a necessity due to increasing wealth and the need for diversification. Investors should consider their consumption basket, future liabilities, and the diversification aspect when making allocations. Mandal also touched upon India's potential to become a global financial hub like Singapore or Dubai, emphasizing gradual progress to avoid capital flight.

Impact: This advice could influence Indian investors to re-evaluate their domestic-centric portfolios and consider diversifying into international markets, potentially leading to more balanced investment strategies and capital flows abroad. It provides a strategic perspective for long-term wealth management beyond immediate market trends. Rating: 7/10

Difficult terms and meanings: AUM (Assets Under Management): The total market value of all the financial assets that a financial institution manages on behalf of its clients. ROE (Return on Equity): A measure of a company's financial performance calculated by dividing net income by shareholders' equity. It shows how effectively a company uses its shareholders' money to generate profits. Cyclical issues: Problems or challenges that occur in cycles, often related to economic ups and downs. For companies, it means their performance tends to follow the broader economic cycle. Mega-caps: Refers to companies with a very large market capitalization, typically over $200 billion. Fiscal position: A country's financial health, referring to its government's revenue and expenditure, and its resulting debt levels. Forex (Foreign Exchange): Foreign currency held by a country or institution, or the trading of currencies. Foreign exchange reserves are a key indicator of a country's financial stability.