Diversification is a key factor to generate optimal return for any investment portfolio. And recently, geographically diversifying one’s portfolio with schemes from international markets is gaining traction. Markets around the globe perform differently each year; thus, diversification to these markets may potentially boost the portfolio to earn stable returns.
Investing in developed markets like the US market allows you to participate in themes and opportunities such as, cashless economy, cloud computing, electric vehicles, e-commerce, artificial intelligence, etc. that are rarely available in the domestic markets.
As a mature market, the US market offers investments in top brands from several leading sectors; it has the highest number of shares in equity markets globally. Thus, investors seeking international investment and diversification may consider investing in index funds that passively track the performance of leading companies from various sectors in the international market space.
ICICI Prudential Mutual Fund has launched ICICI Pru NASDAQ 100 Index Fund, an open-ended index fund replicating NASDAQ-100 Index.
On the launch of this fund Mr Chintan Haria Head- Product Development & Strategy at ICICI Prudential AMC said, “ICICI Prudential NASDAQ 100 Index Fund is the first global based offering in our passive universe. It is an open ended index fund that aims to track the NASDAQ-100 index and replicate the performance of its constituents. NASDAQ-100 Index mainly includes innovation led technology and communications services companies; many of which are part of our day-to-day lives like Apple, Microsoft, Facebook, Alphabet, Facebook, Netflix, and Starbucks. This offering is suitable for investors looking for geographical diversification in their equity allocation in Index Funds.”
Table 1: Details of ICICI Pru NASDAQ 100 Index Fund
| Type | An open-ended index fund replicating NASDAQ-100 Index. | Category | Index Fund |
| Investment Objective | The objective of the Scheme is to invest in companies whose securities are included in NASDAQ-100 Index® and subject to tracking errors, to endeavour to achieve the returns of the above index. However, there is no assurance or guarantee that the investment objective of the scheme shall be achieved. | ||
| Min. Investment | Rs 1000/- and in multiples of Re 1 thereafter. Additional purchase Rs 1000/- and in multiples of Re 1 thereafter. | Face Value | Rs 10/- per unit |
| SIP/STP/SWP | Available | ||
| Plans |
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Options |
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| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager | Ms Priyanka Khandelwal | Benchmark Index | NASDAQ-100 TRI |
| Issue Opens: | September 27, 2021 | Issue Closes: | October 11, 2021 |
(Source: Scheme Information Document)
The investment strategy for ICICI Pru NASDAQ 100 Index Fund will be as follows:
ICICI Pru NASDAQ 100 Index Fund will predominantly invest in stocks constituting the benchmark of the scheme in the same proportion and in exchange traded derivatives on the NASDAQ-100 Index. The scheme will aim to generate returns equivalent to the NASDAQ-100 Index and the endeavour will be to maintain a low tracking error by managing the portfolio in line with the index.
The scheme will track the underlying index performance and will be passively managed restricting the fund manager’s involvement. Investment in NASDAQ-100 index provides investors an opportunity to invest in themes such as cloud computing, e-commerce, artificial intelligence, etc.
The stocks comprising the NASDAQ-100 Index are periodically reviewed by the corporations. A particular stock may be dropped or new securities may be included as a constituent of the index. The portfolio shall be rebalanced within 7 days to ensure adherence to the asset allocation norms of the scheme.
About the benchmark
The NASDAQ-100 Index is designed to measure the performance of 100 of the largest NASDAQ-listed non-financial companies.
The NASDAQ-100 Index 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. The index offers access to leading global brands and allows investors to participate in the international market.
The following is list of top constituents and sectors under the index by their weightage as of August, 31, 2021:
(Source: ICICI Pru NASDAQ 100 Index Fund PPT)
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for ICICI Pru NASDAQ 100 Index Fund
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Equity and Equity related securities of companies constituting the underlying index (NASDAQ-100 Index®) | 95 | 100 | High |
| Debt and Money Market Instruments | 0 | 5 | Low to Medium |
(Source: Scheme Information Document)
Who will manage ICICI Pru NASDAQ 100 Index Fund?
Ms Priyanka Khandelwal will be the dedicated fund manager for this scheme.
Ms Priyanka Khandelwal is Fund Manager – Overseas at ICICI Prudential Asset Management Company Limited. She is Chartered Accountant, Company Secretary, CFA – Level 1, and B.Com graduate with work experience of over 6 years in financial services industry. Prior to this, she has worked as Deputy Manager – Finance with ICICI Prudential AMC Ltd.
The other schemes Ms Khandelwal manages are ICICI Prudential Global Stable Equity Fund (FOF), ICICI Prudential US Bluechip Equity Fund and overseas portion of all schemes of the Fund that have a mandate to invest in overseas securities.
Fund Outlook – ICICI Pru NASDAQ 100 Index Fund
ICICI Pru NASDAQ 100 Index Fund aims to passively invest in the securities comprising the NASDAQ-100 Index to generate optimal returns in line with the index and subject to tracking errors.
The scheme offers investors access to globally leading companies that maintain dominant positions in the international market. NASDAQ-100 INDEX has relatively lower correlation with Indian equity indices and it would not, therefore, affect the portfolio with volatility in domestic markets.
The underlying index has outperformed the broad market in US, and has a relatively good performance record over the last two decades. This scheme offers global diversification, exposure to high quality stocks, global products & services, and a potential hedge against rupee depreciation v/s the US dollar.
Being an index fund, this scheme will passively invest in the stocks consisting of the underlying index and eliminate the risk of active stock selection. The scheme will replicate the performance of the underlying index by minimizing tracking errors, but may not outperform the index.
However, the scheme will indirectly allocate a major portion of its assets to international equities, which are considered highly risky. The scheme will be prone to geo-political risk, currency fluctuation risk, and any changes in social or political aspects of the country the securities belong; these factors will affect the scheme’s performance.
This scheme is suitable for investors with a very high-risk appetite and a long investment horizon that can survive the market volatility and risks involved. You must ensure that your investment objectives are aligned with the fund before investing.
This article first appeared on PersonalFN here
