The pandemic crisis has ignited a big shift in consumer trends as well as the way organizations work. For many of us, cloud computing, remote working, electronic payments, machine learning, over the top (OTT) streaming, among other technological trends, have become an integral part of the ‘new normal’. This shift in trend is expected to persist even in the post-pandemic world.
Consequently, shares of Tech companies have been steadily on the rise. The Nasdaq 100 Index –the world’s major largecap index–constitutes some of these well-known names in technology that are shaping the future.
To give domestic investors an opportunity to invest and benefit from the growth of these Tech giants, Kotak MF has launched Kotak Nasdaq 100 Fund of Fund. The AMC is of the view that the Nasdaq 100 index has a low correlation with the domestic bellwether indices such as Nifty 50 and Nifty 500; and therefore, investors can benefit from this diversification.
As a Fund of fund, Kotak Nasdaq 100 Fund of Fund has a mandate to invest a minimum 95% of its assets in units of overseas ETFs and/or Index Fund based on NASDAQ 100 Index. The performance benchmark index of the fund is Nasdaq 100 Total Returns Index.
Kotak Nasdaq 100 Fund of Fund is an open-ended fund of fund that will seek to track the performance of overseas ETFs and/or Index Fund based on NASDAQ 100 Index. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved.
Table 1: Details of Kotak Nasdaq 100 Fund of Fund
|Type||An Open ended fund of fund investing in units of overseas ETFs and/or Index Fund based on NASDAQ 100 Index||Category||Fund of Fund (Overseas)|
|Investment Objective||To generate long-term capital appreciation by investing in units of overseas ETFs and/ or Index Fund based on NASDAQ 100 Index. However, there can be no assurance that the investment objective of the Scheme will be achieved.|
|Min. Investment||Rs 5,000 and in multiples of Re 1 thereafter||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||Nil|
||Benchmark Index||Nasdaq 100 (Total Returns Index)|
|Issue Opens:||January 11, 2021||Issue Closes:||January 25, 2021|
(Source: Scheme Information Document)
Investment strategy – Kotak Nasdaq 100 Fund of Fund
Kotak Nasdaq 100 FoF will invest predominantly in units of overseas ETFs and/or index funds based on Nasdaq 100 Index. The scheme will follow a passive investment strategy, i.e. it will not attempt to apply any economic, financial, or market analysis on the underlying index.
Here is the indicative list of overseas ETFs and/or Index Fund based on NASDAQ 100 Index:
– iShares NASDAQ 100 ETF
– Lyxor NASDAQ 100 ETF
– USAA NASDAQ-100 Index fund
Or a similar overseas ETF/ and/or Index Fund based on the NASDAQ 100 Index.
Apart from investment in Units of overseas ETFs and/or Index Fund based on NASDAQ 100 Index, the scheme will invest up to 5% of its assets in units of Liquid/ debt schemes, debt, and money market instruments to meet its liquidity requirement.
Under normal circumstances, the fund’s asset allocation pattern will be as under:
Table 2: Asset Allocation of Kotak Nasdaq 100 Fund of Fund
|Instruments||Indicative Allocation (% of assets)||Risk Profile|
|Units of overseas ETF's and/or Index Fund based on NASDAQ 100 Index||95||100||High|
|Debt schemes, Debt & Money Market Instruments, including Tri Party Repo^, G-Secs, Cash and Cash at call, etc.||0||5||Low to Medium|
^or similar instruments as may be permitted by RBI/SEBI
(Source: Scheme Information Document)
About Nasdaq 100 Index
The Nasdaq-100 is one of the world’s pre-eminent large-cap growth indexes. It includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization.
Nasdaq 100 is home to some of the most well-known names in technology, including Apple, Microsoft, Alphabet, Intel, Amazon, and Facebook. The index also includes category-defining companies on the forefront of innovation in other key industries such as Moderna, Starbucks, and Tesla.
The composition of the index as on December 31, 2020 is as follows:
(Source: Product presentation – Kotak Nasdaq 100 FoF)
Who will manage Kotak Nasdaq 100 Fund of Fund?
Mr Arjun Khanna will be the dedicated fund manager for Kotak Nasdaq 100 FoF; Mr Abhishek Bisen will be fund manager for debt securities of the scheme.
Mr Arjun Khanna is the dedicated fund manager for investments in foreign securities in various schemes at Kotak AMC. He has over 13 years of experience, out of which 12 years has been with Mutual Funds in Equity Research. Prior to joining Kotak Mahindra Mutual Fund, he was associated with Principal Mutual Funds. He has also worked at Citibank N.A. in an earlier stint. His qualifications include CFA, FRM, MMS (Finance), and B.E (Electronics).
Mr Abhishek Bisen is Senior Vice President – Debt at Kotak AMC. He has been associated with the company since October 2006 and his key responsibilities include fund management of debt schemes. Prior to joining Kotak AMC, he worked with Securities Trading Corporation of India Ltd where he was tasked with Sales & Trading of Fixed Income Products apart from doing Portfolio Advisory. His earlier assignments also include 2 years of merchant banking experience with a leading merchant banking firm.
He currently manages Kotak Bond Fund, Kotak Gilt Investment (Regular& PF-Trust), Kotak Balanced Advantage Fund, Kotak Equity Savings Fund, Kotak Equity Hybrid Fund, Kotak Debt Hybrid Fund, Kotak Gold Fund and Kotak Gold ETF.
Fund outlook – Kotak Nasdaq 100 Fund of Fund
Even as India is striving to regain normalization, some of the changes we have adopted amid the pandemic could continue as the norm going forward. This includes increasing use of digital payments, cloud storage, online movie streaming, etc.
The companies at the forefront of such growth and innovation can create significant value for its investors. But since these companies are not listed in India, investing in International funds allows investors to tap opportunities abroad and diversify the portfolio geographically.
Kotak Nasdaq 100 FoF is one such fund that provides investors the opportunity to potentially benefit from the growth. The fund’s performance will depend on the performance of overseas ETFs and/or Index Fund that invest in NASDAQ 100 Index.
Keep in mind that while there are advantages to investing in International Funds, the fortune of the scheme would be closely linked to how the underlying companies in those economies fare, the overall economic scenario, political scenario, and will be subject to exchange rate fluctuation risk.
Therefore, before you decide to invest in Kotak Nasdaq 100 FoF, ensure that your portfolio has a well-diversified exposure to domestic equities. Besides this, consider its suitability after assessing your risk appetite, investment horizon, and financial goals.
This article first appeared on PersonalFN here