The Economic survey 2020-21 tabled in parliament on Friday estimated that India’s economy could contract 7.7% in FY21, mainly due to the havoc wreaked by the pandemic. However, the survey also predicts that Indian economy will have a V-shaped recovery in the next financial year 2021-22.
Looking at the current domestic market scenario, with the economic difficulties and the ongoing struggle to stop the virus spread through vaccine, some of you might be thinking of investing in international/overseas funds to have a better portfolio diversification.
Consequently, mutual fund houses are coming up with innovative schemes across market types, sectors, and risk classes, with more experimental investors entering the playground. The consistent outperformance of developed markets particularly with some of the companies in the United States (Facebook, Apple, Amazon, Netflix and Google) which are uniquely placed to face huge disruptions that are happening or likely to happen in the global economy in the post- Covid-19 pandemic world.
Investing in Global market allows you to bet on another large economy that is likely to overcome the virus threat sooner than India.
You see, there are International funds dedicated to the US market, Europe, Brazil, China, Asian markets, emerging markets that usually follow a passive investment strategy to provide domestic investors an opportunity to benefit from the growth in overseas market.
International/Overseas Fund of Funds (FoF) invest in existing overseas funds and thereby indirectly invest in underlying securities of these funds.
Since the Indian market has a low correlation with some of the overseas markets, having global exposure ensures healthy diversification and gives exposure to foreign currency as an asset class and such geographical diversification is becoming very vogue in mutual fund circles.
Axis Mutual Fund house has launched Axis Greater China Equity Fund of Fund to provide domestic investors with an opportunity to invest in the overseas market. The fund house is of the view that the Chinese economy is slowly transitioning into a high value manufacturing hub. Besides, Chinese companies today are at the forefront of technological innovation and are fast growing.
Axis Greater China Equity Fund of Fund is an open-ended fund of fund scheme investing in Schroder International Selection Fund Greater China that aims to provide capital growth by investing in equity and equity related securities of companies in People’s Republic of China, Hong Kong SAR, and Taiwan.
However, there can be no assurance that the investment objective of the Scheme will be realized.
Table 1: Details of Axis Greater China Equity Fund of Fund
| Type | An open ended fund of fund scheme investing in Schroder International Selection Fund Greater China | Category | Fund of Fund (Overseas) |
| Investment Objective | To provide long term capital appreciation by predominatingly investing in units of Schroder International Selection Fund Greater China, a fund that aims to provide capital growth by investing in equity and equity related securities of People's Republic of China, Hong Kong SAR and Taiwan companies. The Scheme may also invest a part of its corpus in debt, money market instruments and / or units of liquid schemes in order to meet liquidity requirements from time to time. However, there can be no assurance that the investment objective of the Scheme will be realized. |
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| Min. Investment | Rs 5,000 and in multiples of Re 1/-thereafter Additional Purchase Rs 100/- and in multiples of Re 1/- thereafter | Face Value | Rs 10/- per unit |
| Plans |
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Options |
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| Entry Load | Not Applicable | Exit Load | If redeemed / switched-out within 12 months from the date of allotment:
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| Fund Manager |
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Benchmark Index | MSCI Golden Dragon Index (in INR Terms) |
| Issue Opens: | January 29, 2021 | Issue Closes: | February 05, 2021 |
(Source: Scheme Information Document)
Investment Strategy – Axis Greater China Equity Fund of Fund
Axis Greater China Equity FoF holds an objective to provide long-term capital appreciation and will invest in Schroder International Selection Fund Greater China, a fund that aims to provide capital growth by investing in equity and equity related securities of People’s Republic of China, Hong Kong SAR and Taiwan companies.
As the Scheme will predominantly follow a passive investment strategy for investments in the overseas mutual fund, it will endeavour to minimise the portfolio turnover subject to exigencies and needs of the scheme.
Generally, for the investments in overseas fund, the turnover will be confined to the subscriptions and redemptions (including inter-fund switches, if any) in the underlying overseas fund.
Being a Fund of Fund, Axis Greater China Equity FoF is mandated to invest minimum 95% of its assets in the underlying fund i.e. Schroder International Selection Fund Greater China. In addition, the Scheme may also invest up to 5% of its corpus in debt, money market instruments and / or units of liquid schemes in order to meet liquidity requirements from time to time.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation of Axis Greater China Equity Fund of Fund
| Instruments | Indicative Allocation (% of assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Units / shares of Schroder International Selection Fund Greater China | 95 | 100 | Medium to High |
| Debt, Money market instruments and / or units of liquid schemes* | 0 | 5 | Low to Medium |
*Investment in Securitized debt (excluding foreign securitized debt), if undertaken, would not exceed 5% of the net assets of the Scheme.
(Source: Scheme Information Document)
About Schroder International Selection Fund Greater China
Schroder International Selection Fund Greater China (“SISF-GC”) invests at least two-thirds of its assets in equities of companies in People’s Republic of China, Hong Kong and Taiwan. SISF-GC is benchmarked against the MSCI Golden Dragon Index.
The fund manager invests on a discretionary basis and is not limited to investing in accordance with the composition of this benchmark. The fund may invest directly in China B-Shares and China H-Shares and may invest less than 30% of its assets in China A-Shares through Shanghai/Shenzhen-Hong Kong Stock Connect.
The performance history of Schroder International Selection Fund Greater China in INR terms as on 31st December 2020 is shown below:
Particulars |
1Y* | 3Y* | 5Y* | Since Inception (March 28, 2002) |
| Return (Cumulative) % | Return (Cumulative) % | Return (Cumulative) % | Return (Cumulative) % | |
| Schroder ISF Greater China Class C (Accumlation) | 47.49% | 22.39% | 22.64% | 16.41% |
| MSCI Golden Dragon TR | 31.46% | 15.63% | 17.69% | 12.11% |
*Returns greater than 1 year are compounded annualized (CAGR).
(Source: Scheme Information Document)
Who will manage Axis Greater China Equity Fund of Fund?
Axis Greater China Equity FoF will be managed by Mr Hitesh Das for foreign securities and Mr R Sivakumar for fixed income.
Mr Hitesh Das is an Equity Research Analyst at Axis Mutual Fund, prior to this he was associated with Barclays Securities India Pvt. Ltd., Credit Suisse Securities (India) Pvt. Ltd., Ebusinessware (India) Pvt. Ltd. and as a Risk Analyst at Yes Bank.
His qualifications include PGDM, M.Tech, B.Tech and currently managed schemes are; Axis Growth Opportunities Fund (along with Jinesh Gopani), Axis ESG Equity Fund, Axis Global Equity Alpha FoF, Axis Special Situations Fund, Axis Bluechip Fund (along with Mr. Shreyash Devalkar), Axis Midcap Fund (along with Mr. Shreyash Devalkar), Axis Multicap Fund (along with Mr. Shreyash Devalkar), Axis Focused 25 Fund (along with Mr. Jinesh Gopani).
Mr R Sivakumar is Head – Fixed Income & Products at Axis Asset Management Company Ltd. He holds a degree in Bachelor of Technology, IIT, Madras and PGDM, IIM, Ahmedabad. He also worked as a Fund Manager at Axis AMC Ltd., Chief Operating Officer at Fortis Investment Management (India) Pvt Ltd., Fund Manager at Sundaram AMC Ltd. and Research Analyst at Zurich Asset Management (India) Pvt. Ltd.
He currently manages; Axis Dynamic Bond Fund (Along with Mr. Devang Shah), Axis Capital Protection Oriented Fund – Sr. 5 (Along with Mr. Ashish Naik), Axis Children’s Gift Fund (Along with Mr. Ashish Naik), Axis Triple Advantage Fund (Along with Mr. Ashish Naik), Axis Dynamic Equity Fund (Along with Mr. Anupam Tiwari), Axis Equity Saver Fund (Along with Mr. Anupam Tiwari), Axis Equity Hybrid Fund (along with Mr. Ashish Naik), Axis Retirement Savings Fund, Axis All Seasons Debt FoF and Axis Global Equity Alpha FoF.
Fund Outlook – Axis Greater China Equity Fund of Fund
International/Overseas FoF offer an excellent opportunity for diversifying and earning returns by being a part of the growth of companies around the world.
Axis Greater China Equity FoF will be a passively managed fund investing predominantly in unit / shares of Schroder International Selection Fund Greater China. Hence, the returns of the fund will be nearly in line with that of the underlying fund.
Investing in overseas fund offers a hedge against local events such as, political instability, policy changes, and other socio-economic issues. It may also offer access to some unique propositions in stocks/brands/sector which may not be available in the domestic markets. Moreover, it provides a hedge against currency fluctuations.
However, the geo-political and social situation of the country where this fund is investing could have an impact on the fund performance and there is currency risk involved, as there can be fluctuations in forex conversion rates.
Moreover, the tax treatment of international funds should be kept in mind while selecting them. This scheme do not invest in domestic equities, therefore these are classified like debt funds for taxation purpose.
Like any other investment, investing overseas FoF has its own set of pros and cons. Understand them thoroughly to make an informed investment decision.
This article first appeared on PersonalFN here
