Another overseas fund of funds scheme is set to launch with little clear edge over Indian equities

Since the beginning of this year three fund houses have filed offer documents with the Securities and Exchange Board of India (SEBI) to launch overseas fund of funds. Two of them DSP Blackrock US Flexible Equity Fund and Reliance US Dollar Fund filed their offer documents last month itself. ICICI Prudential had earlier filed its offer document to launch ICICI Prudential US Bluechip Equity Fund, but it is yet to be launched. Now the fund house plans to launch another overseas fund of funds—ICICI Prudential Global Stable Equity Fund. This scheme would invest 80%-100% of its assets in units/shares of Nordea 1—Global Stable Equity Fund (N1—GSEF) and/or similar overseas mutual fund schemes. The remaining part of the portfolio would be invested in domestic money market securities or schemes. The objective of the scheme is to provide ‘adequate’ returns by investing in the units of the overseas funds. But why would one want to invest in an overseas fund when one could earn more than adequate returns by investing in Indian equity? Not to forget the tax benefit. Moneylife analysed the returns of the foreign fund N1—GSEF and found that the Sensex performed much better in most of the periods.

Excluding the last one-year period, the Sensex has performed much better in the long-term periods. Had one invested in a good equity diversified fund in the same period one would have earned better returns. The prospectus of the fund mentions that the “investment manager for the fund would focus on equities providing a potential of stable return over a time span of several years”. However, it seems that it would take the fund some more years to stabilise.

The fund has as holding of over 104 companies from various countries and sectors. Around 52% of the fund’s portfolio is invested in US stocks. The fund is also invested in stocks of UK, Japan, France and Switzerland. Its top five holdings include Abbott laboratories, Wal-Mart Stores, Exxon Mobil, Microsoft and Johnson & Johnson, all of which are based in the US.

Additional Scheme Details
Minimum Investment amount: Rs5,000 and in multiple of Rs1,000 thereof
Additional Investment amount: Rs1,000 and in multiple of Rs1,000 thereof
Minimum Instalment for SIP: Rs1,000
Annual scheme recurring expenses:  2.5% p.a. of average daily net assets
Exit load if switched before one year: 1%, and nil after one year
Taxation: Investors would be subject to long-term and short-term tax on capital gains