US-focused funds seem to have lost steam in the recent past. While the three-year category average compounded annual return of these funds, which have garnered assets under management (AUM) of Rs 1,186.21 crore, is a handsome 16.09 per cent, the return over the past year has shrunk to a dismal -2.31 per cent. Financial experts, however, suggest that investors should stay invested in these funds for the long haul.
The outlook for the US equity markets has turned negative in the short-term. The primary reason for this is US Fed policy. With the US economic recovery turning out to be less robust than anticipated, the Fed has climbed down on its earlier guidance of four rate hikes and has now settled for two. The Fed is also concerned about the weak state of the global economy. Due to this change of stance, portfolio flows are now moving out of US equities and into bonds, gold and emerging markets, resulting in the current bout of underperformance.
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