When I started investing post qualifying as a chartered accountant in the early 1990s, shares of multi-national companies like Pfizer, Glaxo, Hindustan Lever, Colgate and Castrol were glittering stars at the bourses and it is no surprise that they continue to do well in their present avatars even today, three and a half decades down the line.
Today, some mutual fund houses offer investors the option of Multi-National Companies Funds (MNC Funds). They are thematic equity mutual funds that focus on investing in international companies that are publicly listed and have a significant degree of foreign ownership as well as overseas business activities.
Some of the positives that have historically driven investors to MNC stocks and funds are their strong brand equity, capital structure, cash flows and ROE besides relatively low debt. There are thus inbuilt corporate checks and balances that provide these companies the opportunity to deliver strong performances.
MNC Fund managers usually practice a bottom up approach to build their portfolios with MNC stocks, using consistent parameters for selection. While these funds are thematic, they offer investment opportunities across sectors such as FMCG, healthcare, capital goods, autos, and IT. In terms of MNCs, the portfolio mostly has mid and large caps, alongside some quality small caps.
MNC companies have historically enjoyed better revenue streams and provide relatively better insulation against stock price shocks during economic downturns or crises. MNCs are known to have more survivability during market and economic volatility and tend to be among the first to recover during economic downturns. They are also reputed to have a high degree of corporate governance compliance and better transparency. This boosts investor trust while simultaneously reducing the chances of governance surprises.