Top Offshore Mutual Funds to Invest in 2025 for a Diversified Portfolio

In 2025, Indian investors are increasingly exploring opportunities beyond domestic borders. Offshore funds and international mutual funds have become a smart way to participate in the growth stories of global giants whether it’s Silicon Valley’s tech leaders, Europe’s green energy pioneers, or Asia’s innovation hubs.

Rising market volatility at home, coupled with the gradual depreciation of the rupee, has made global mutual funds an attractive diversification tool. By investing overseas, you not only spread your portfolio risk but also gain from sectors and geographies that may outperform India in certain market cycles.

From the AI boom in the US to renewable energy advancements in Europe, top offshore funds give investors access to trends shaping the world economy. And with SEBI-regulated feeder funds, investing abroad has never been more accessible for Indian retail investors.

In this blog, we’ll explore the best-performing offshore mutual funds to watch in 2025, the factors you should consider before investing, and the risks and rewards of adding international exposure to your portfolio.

Let’s Jump in.

What Are Offshore Mutual Funds?

Offshore mutual funds are investment vehicles that allow you to invest in assets outside your home country, in this case, India. These funds channel your money into global markets, giving you access to foreign equities, bonds, commodities, or a mix of asset classes.

For Indian investors, offshore investing is typically done through feeder funds or fund-of-funds (FoFs). In a feeder fund, your investment is pooled and sent to an underlying overseas mutual fund managed by an international asset management company (AMC). A fund-of-funds, on the other hand, may invest in multiple offshore funds to create a diversified global portfolio.

Types of Offshore Funds for Indian Investors:

• Geographic-focused funds: Target a specific country or region (e.g., US, Japan, Europe).
  
  
• Thematic funds: Focus on sectors or trends like technology, clean energy, AI, or healthcare.
  
  
• Global diversified funds: Spread investments across multiple regions and sectors.
  
  

Tax Treatment in India

Post-April 2023, offshore funds are taxed as debt funds. This means gains are added to your income and taxed as per your slab rate, regardless of the holding period. Indexation benefits on long-term capital gains are no longer applicable.

In short, offshore mutual funds act as a bridge between your portfolio and the world’s top markets, offering diversification, currency exposure, and access to growth opportunities not available in India.

Suggested Read: Mutual Funds That Outperformed Nifty 50 in 2025: Bold Picks for Bold Investors

Why Invest in Offshore Funds in 2025?

Global markets in 2025 are presenting opportunities that Indian investors simply can’t ignore. While India’s economy remains strong, certain sectors and regions abroad are poised to deliver exceptional growth making offshore funds a strategic addition to a well-rounded portfolio.

Global Diversification

Investing solely in India exposes your portfolio to country-specific risks; political changes, sector slowdowns, or policy shifts. Offshore funds spread investments across geographies, reducing the impact of any single market downturn.

Exposure to Global Leaders

Some of the world’s most valuable companies; Apple, Microsoft, Nvidia, Tesla are not listed on Indian exchanges. Offshore funds give you direct access to such industry leaders and innovative startups shaping the global economy.

Currency Advantage

The Indian rupee has historically depreciated against the US dollar over the long term. Holding assets in stronger currencies like USD, EUR, or JPY can act as a natural hedge, boosting returns when converted back to INR.

Thematic & Sectoral Opportunities

Themes like Artificial Intelligence, Electric Vehicles, Renewable Energy, and Biotechnology are driving global stock performance. Many of these opportunities are concentrated outside India, and international mutual funds allow you to participate.

Regulatory Accessibility

Thanks to SEBI-approved feeder funds, investing abroad is now simple. You don’t need to open an overseas trading account; you can invest via Indian AMCs within RBI’s Liberalised Remittance Scheme (LRS) limits.

In essence, 2025 is the year to think beyond borders. Offshore funds can position your portfolio to capture worldwide growth while cushioning against domestic volatility.

Suggested Read: Top Penny Stocks to Invest in 2025 for a Smart Portfolio

Factors to Consider Before Investing in Offshore Funds

Before adding offshore funds to your portfolio, it’s essential to understand the parameters that can impact returns and risk. Global investing offers huge potential, but it comes with nuances that differ from domestic mutual funds.

Geographic Focus

Offshore funds can target:

• Single countries (e.g., US, Japan) for concentrated exposure.
  
  
• Regional markets (e.g., Europe, Asia ex-India) for balanced diversification.
  
  
• Truly global portfolios with investments spread across continents. Choose based on your risk appetite, single-country funds can deliver higher gains but carry more volatility.
  
  

Fund Size & Liquidity

A larger Assets Under Management (AUM) generally indicates better stability and liquidity. Very small funds might struggle during market stress or face higher per-unit costs.

Expense Ratio

Offshore feeder funds often have higher expense ratios due to fees from both the domestic AMC and the underlying overseas fund. Compare costs carefully as high expenses can eat into your returns.

Historical Performance & Volatility

Look at 3-year and 5-year CAGR (Compound Annual Growth Rate) alongside volatility measures like Standard Deviation and Sharpe Ratio. This helps you gauge consistency, not just recent outperformance.

Currency Risk

Your returns can fluctuate due to exchange rate movements. For example, if the rupee weakens against the dollar, your USD-denominated gains may increase when converted back to INR and vice versa.

SEBI & RBI Limits

As of now, SEBI has capped overseas investments by Indian AMCs at $1 billion per mutual fund house, and $300 million for investments in overseas ETFs. Check if your preferred fund is still accepting new subscriptions.

Tax Treatment

Post-2023, offshore mutual funds are taxed as debt funds in India, meaning gains (short or long term) are taxed as per your income slab without indexation benefits.

Being aware of these factors ensures that your offshore investment decisions are driven by informed judgment, not just past returns or popularity.

Top Offshore Mutual Funds to Invest in 2025

Here’s a curated list of standout options that blend strong returns, healthy AUM, and specialized themes suitable for Indian investors seeking global exposure:

Name of the Fund	YTD	1 Year Return	Expense Ratio	AUM (Cr)
DSP World Gold FoF	72.30	77.30	1.64	1,202
Edelweiss Europe Dynamic Equity Offshr	33.95	33.22	0.60	132
HSBC Brazil Fund	31.57	11.36	1.01	96
ICICI Pru Strategic Metal and Energy Equity FoF	30.85	28.06	0.59	95
Mirae Asset Hang Seng TECH ETF FoF	30.69	81.95	0.09	85
Nippon India ETF Hang Seng BeES	27.71	55.87	0.93	948
DSP World Mining FoF	27.09	26.17	1.51	130
Invesco India Pan European Equity FoF	26.62	23.88	0.59	52
ABSL International Equity Dir	24.73	30.62	2.07	229
Mirae Asset Hang Seng TECH ETF	24.35	68.50	0.56	376

Data updated is as of 11.08.2025.

Risks of Investing in Offshore Funds

While offshore funds can offer impressive diversification and growth potential, they also come with certain risks that investors should weigh carefully before investing.

Currency Fluctuations

Returns are influenced not just by the performance of the underlying assets but also by currency movements.

• Positive Impact: If the Indian rupee weakens against the fund’s base currency (e.g., USD, EUR), your returns increase when converted back to INR.
  
  
• Negative Impact: If the rupee strengthens, your gains could shrink, or you may even face losses despite good underlying asset performance.
  
  

Geopolitical & Economic Risks

International markets can be affected by trade wars, political instability, interest rate hikes, or recession risks in their respective regions. For example, US interest rate changes can impact tech-heavy funds significantly.

Sector Concentration Risk

Many offshore funds are thematic like technology or healthcare and can underperform when that sector faces a downturn. For instance, a tech fund may see sharp declines if global tech valuations correct.

Regulatory & Investment Limits

SEBI caps how much each AMC can invest overseas. Once this limit is hit, new inflows might be paused, affecting your ability to invest or increase holdings in a particular fund.

Higher Expense Ratios

Offshore feeder funds often incur costs at two levels:

Domestic AMC fees

Underlying overseas fund fees

This can make them costlier compared to local equity funds, and high expenses can eat into returns over the long term.

Tax Treatment in India

Post-April 2023, offshore funds are taxed like debt funds. Gains, whether short or long term, are added to your taxable income and taxed as per your slab rate. No indexation benefit is available.

How to Invest in Offshore Mutual Funds

Investing in offshore mutual funds from India has become increasingly accessible and straightforward, allowing Indian investors to diversify internationally while investing in Indian rupees.

Step 1: Choose the Right Offshore Mutual Fund

Start by selecting offshore or international mutual funds that align with your investment goals, risk tolerance, and preferred sectors or geographies. Many Indian asset management companies offer funds of funds (FoFs) that invest globally, making it simpler to gain offshore exposure without directly handling foreign securities or currencies.

Step 2: Application and Investment Process

Indian investors can apply online or through fund houses directly, using Indian rupees for investments. You typically fill out the application, provide KYC documents, and invest via payment modes such as online transfer or cheque. Many offshore funds available in India are open-ended, allowing flexible entry and exit without lock-in periods.

Step 3: Investing via Feeder Funds or Direct Overseas Funds

• Feeder Funds: Most Indian investors invest through feeder funds where their money goes into a domestic fund that channels it into a global “master fund.” This method avoids complexities of forex transactions and regulatory hurdles.
  
  
• Direct Overseas Investment: Some investors with demat and trading accounts may also invest directly in overseas funds or stocks, though this requires compliance with RBI’s Liberalized Remittance Scheme (LRS) limits (currently USD 250,000 per financial year).
  
  

Step 4: Systematic Investment Plans (SIP)

Many offshore mutual funds offer SIP options, enabling disciplined, periodic investments that benefit from rupee cost averaging over time.

Pro Tip: Use SIP calculator for estimated returns analysis.

Step 5: Monitor and Review

Once invested, regularly track fund performance, global market trends, and currency movements. Reports and statements are usually available online from the fund provider.

Regulatory and Tax Considerations

Offshore mutual funds are regulated by SEBI and RBI guidelines in India. Indian investors should also understand the tax implications on returns, which may be treated as capital gains subject to Indian tax laws. Consulting a tax advisor is advisable before investing.

Offshore mutual funds provide Indian investors an effective gateway to global diversification, broadening market exposure and potentially improving returns through professionally managed international portfolios, while simplifying investments by using Indian rupees and Indian platforms.

Taxation on Offshore Mutual Funds

Understanding the tax implications of investing in offshore mutual funds is essential to ensure compliance and optimize your after-tax returns. Tax treatment can be complex, as it often depends on where the fund is domiciled and the investor’s country of residence.

For Indian investors, here are some key taxation points to consider for offshore mutual funds in 2025:

• Capital Gains Tax: Gains from the sale or redemption of offshore mutual funds are generally treated as capital gains under Indian tax law.
  
  
  • Short-Term Capital Gains (STCG): If the holding period is less than 36 months (3 years), the gains are classified as short-term and taxed as per the investor’s income tax slab rates.
    
    
  • Long-Term Capital Gains (LTCG): If held for more than 36 months, gains qualify as long-term and are taxed at 20% with indexation benefits. Indexation adjusts the purchase price for inflation, lowering taxable gains.
    
    
• Dividend Income: Dividends received from offshore mutual funds are taxable in the hands of the investor at their applicable income tax slab rates. Additionally, dividend distribution tax (DDT) has been abolished in India.
  
  
• Tax Treaties and Double Taxation: India has Double Taxation Avoidance Agreements (DTAAs) with many countries where offshore funds are domiciled. These can help avoid or reduce double taxation, but the specifics vary by treaty and require careful assessment.
  
  
• Foreign Tax Credit: If taxes are paid in the offshore fund’s country on dividends or capital gains, Indian investors may be eligible to claim foreign tax credit against their Indian tax liability.
  
  
• Filing and Reporting: Offshore investments must be disclosed in Indian income tax returns and relevant RBI filings (such as Schedule FA for foreign assets) must be made as per regulatory requirements.
  
  

Given the complexity and frequent changes in tax regulations, consulting a qualified tax advisor is strongly recommended before investing in offshore mutual funds. This ensures clarity on tax liabilities and compliance with local and international tax laws, helping you make the most of your global investment strategy.

Who Should Invest in Offshore Funds?

Offshore funds can be powerful portfolio enhancers but they aren’t meant for everyone. Before investing, consider your financial goals, risk tolerance, and investment horizon.

Ideal for

• Long-Term Investors: Offshore funds work best when held for 5 years or more, allowing global markets and currency movements to play out.
  
  
• Those Seeking Diversification: Investors who want to reduce India-specific risks by adding exposure to foreign markets, sectors, and currencies.
  
  
• Moderate-to-High Risk Takers: Global markets can be volatile. Investors comfortable with short-term fluctuations in pursuit of long-term gains may benefit most.
  
  
• Theme or Sector Enthusiasts: Those keen on participating in global megatrends like AI, electric vehicles, clean energy, or healthcare innovation that may not be fully represented in Indian markets.
  
  

Not Ideal for

• Short-Term Investors: Global equities can be volatile in the short run; if you need the funds within 2-3 years, offshore funds may not suit you.
  
  
• Low Risk Tolerance Investors: If currency swings or geopolitical events causing 10-20% temporary drops would cause anxiety, you may prefer safer domestic options.
  
  

In short, offshore funds fit best into a diversified, long-term investment plan for investors who want to think beyond borders while accepting the inherent risks of global markets.

Bottom Line

In today’s interconnected economy, investment opportunities extend far beyond domestic markets. Offshore funds give Indian investors a direct gateway to participate in global growth stories whether it’s the AI-driven boom in Silicon Valley, clean energy leadership in Europe, or healthcare innovations in Japan. By adding these funds to your portfolio, you can reduce India-specific risks, benefit from currency appreciation, and access industries that may not be fully represented in local markets.

That said, offshore investing is not without its challenges. Currency volatility, higher expense ratios, and geopolitical uncertainties can impact returns. The key is to choose funds aligned with your long-term goals, diversify across regions or themes, and avoid making decisions based solely on short-term performance.

In 2025, the case for global diversification is stronger than ever. If approached thoughtfully with the right fund selection, adequate holding period, and a clear understanding of risks, offshore funds can transform from a niche portfolio addition into a powerful growth driver for the years ahead.

Disclaimer: This blog is for informational purposes only and does not constitute investment advice, stock tips, or recommendations to buy, sell, or hold any security or mutual fund. All data provided is based on publicly available information and historic performance, which may not be indicative of future results. Mutual fund investments are subject to market risks; please read all scheme-related documents carefully before investing. Returns are subject to market conditions, currency fluctuations, and other economic factors. Investors should consult a qualified financial advisor before making any investment decisions.

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