Outsourcing centers such as India may stand to benefit from the financial pressures generated by a global slowdown.
One of the most powerful forces in economics is that of cost, and there is no time when this force exerts more influence on shaping economic landscapes than as a slowdown or recession approaches.
Within each company, no matter where on this globe, a slowdown in business activity invariably allows accountants to enter the fore and take cost-cutting measures such as layoffs and outsourcing.
If a company begins to outsource operations to a low-cost center such as India, rivals may have to follow suit in order to continue to compete on a level footing.
This can also occur within a large company where one division leads the way in outsourcing and shows success in raising profitability which in turn causes other divisional managers to seek out the same advantages from outsourcing.
This is not great news for the U.S. employee. However, investors may be able to capitalize on such trends by considering a position in a fund exposed to Indian outsourcing and IT.
Here are some open ended mutual funds to consider:
However, the fee structure on these funds is high -- especially for
Eaton Vance Greater India Fund
, which has an expense ratio of 2.64%, a back load of 5% and a 12-b1 fee of 1%. The
Matthews India Fund
is cheaper, with an expense ratio of 1.4% and an early withdrawal fee of 2%.
There is one other option: the new
Wisdom Tree India Earnings Fund
. This ETF offers investors a way to pay fewer fees, with an expense ratio of 0.88%, and obtain the software exposure of the previous two funds combined with a strong leaning toward oil & gas. It's perfect for those investors who also want exposure to energy.
The sector allocations for these funds are given below:
Sam Patel, CFA, is the manager of mutual fund research for the TheStreet.com Ratings.
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