What is the Global Education Strategy (GES)?
GES is India’s only strategy aimed at financially securing the goal of funding expensive foreign education. Under this strategy, the investor makes systematic investments in US$ Debt instruments. This enables the investor to earn higher net returns in dollar terms vs investments in their domestic currency. The central theme of this strategy is to play the inherent strength of US dollar vs. EM currencies over medium to long term.
Where are the investments made?
Investments are made in bespoke debt opportunities into operational/existing and cash flowing facilities in healthcare and lease only residential apartments. These facilities are qualified under HUD refinance programme by US Federal Government. HUD refinance is a form of institutional exit, with a 100% track record.
What is the quantum of investment?
The strategy involves starting with a minimum investment amount of US$100,000. The total investment amount is flexible and is a direct function of the final intended foreign education corpus and the pay-out years of the same. Typically plans are made with the corpus from US$250,000 - 300,000 for Under-graduate (UG) to US$100,000 - 175,000 for Post-Graduate (PG) programmes in the top countries like USA, UK, Australia and so on.
How are the investments made? Are they made lump-sum or in instalments?
Depending on your target corpus, investments are made through a Systematic Investment Plan (SIP) model. An investor starts his portfolio with a minimum investment of US$100,000. The remaining SIP amounts are planned as per your target corpus and duration with a minimum instalment of US$25,000.
How long is the tenor of investment? When can I start investing?
The tenor is flexible and can be set by the investor depending on when he anticipates the burden of foreign education. However, the investor needs to start investing atleast 3 years prior to the start of child’s college.
The central premise of the Strategy is the inherent strength in US$ which typically plays out over the medium to long term. Hence, the earlier a parent plans for the same, the higher the expected pay-out which would result in substantial saving of the overall cost of foreign education in Rupee terms
How secure are my investments?
The investments are only made in non-cyclical underlying asset class.
nvestments are made into operational and cash-flowing assets which are less risky in general. Furthermore, investments are made into HUD qualified assets which further limits risk.
Do I have oversight over my investment? How do I track my investment’s performance?
Our investor reporting norms are as follows:
- Monthly email and con-call with Fund Manager about investment performance
- Quarterly NAV reporting
- Monthly dividend pay-out (with option to reinvest)
Is the GES only for US education? What if my child gets into a non-US universities abroad?
No, the Strategy does not limit you to the US only. The Strategy can be used for any undergraduate or postgraduate international programme globally. The idea is to lock your savings in US$ at current market rate and let US$ strength play out over medium to long term.
How frequently are the pay-outs made to the investor?
The pay-outs to the investor for covering the child’s college living expenses are made once a year. Typical payout month is June/July of every calendar year. Investors are paid out in pro-rata terms from date of investment.
What if I invest in the GES and my child decides to stay back in India?
If the child doesn’t proceed to study abroad as was previously planned, the US$ SIP plan you invested in comes back to you as a traditional investment. The US$ denominated nature of this investment still enables you to earn highly competitive returns (risk-adjusted) in local EM currencies
Is this a permissible investment under RBI’s Liberalised Remittance Scheme (LRS)? How will the remittance be made considering RBI has restrictions on overseas remittance?
Yes. This fund is a permitted investment under LRS. RBI permits an annual remittance of US$250,000 per individual, who is a resident in India.
What is the tax liability on my investment?
The returns will be treated as Long Term Capital Gains (LTCG) and are subject to taxation in India. The investor must consult his/her tax advisor for their tax implications in India.
What happens if I decide that I do not want to continue with GES midway through my investment?
In case your priority changes and you decide to opt out, one of the two things are offered to you
- Your money stays in the fund as a traditional investment earning US$ returns. US$ strength over time coupled with the coupon we offer results in highly competitive returns (risk-adjusted) in local EM currencies
- The fund offers four redemption windows in a year. Investors may put in their redemption request in one of these four windows and exit the fund altogether. The redemption will be made as per available free cash with the fund and will be paid out on first-in first-out basis to the clients based on the timing of their redemption requests.