International funds offer opportunities to invest in sectors and themes that are rarely available in the domestic markets. A well-diversified portfolio across asset classes and spread across geographies with adequate allocation can mitigate the overall risk.
Allocation to international equity funds allows you to participate in the best companies and several sectors/themes across the globe. The Nasdaq-100 Index has a low correlation with Indian indices, and it reflects companies across major industry groups, including computer hardware and software, telecommunications, retail/wholesale trade, and biotechnology. It has some of the world’s biggest innovators – Apple, Alphabet, Meta, Zoom, Tesla, etc. Overall, technology companies constitute 60% of the Nasdaq 100 index.
If you are looking to invest in the developed international markets and benefit from the growth potential of these emerging companies, you may consider investing in the NSADAQ-100 index. However, international equities are highly risky in nature; thus, investors must ensure to have a high-risk appetite if they wish to invest in mutual funds tracking an international index.
Considering the current dynamic conditions of the world economy, the markets are expected to face intensified volatility in the near term. Passively managed international funds are a good option for domestic investors willing to invest in international markets. Invest in a Fund of Fund scheme that tracks an international index or a scheme that is directly tracking an international benchmark, rather than investing in international stocks individually.
Navi Mutual Fund, backed by Mr Sachin Bansal (Flipkart co-founder), is offering investors a chance to invest in the biggest US companies at a very low cost as a part of its latest fund offering. Navi NSADAQ 100 Fund of Fund is an open-ended fund of fund investing in units of overseas ETF’s and/or Index Fund based on the NASDAQ-100 Index.
Table 1: Details of Navi NASDAQ 100 Fund of Fund
| Type | An open-ended fund of fund investing in units of overseas ETF's and/or Index Fund based on the NASDAQ-100 Index. | Category | Fund of Fund (Overseas) |
| Investment Objective | The investment objective of the scheme is to provide long-term capital appreciation by investing in units of overseas ETF's and/ or Index Fund based on the NASDAQ-100 Index. However, there is no assurance that the investment objective of the Scheme will be realized. | ||
| SIP/STP/SWP | Available | ||
| Min. Investment | Rs 500/- 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 |
|
Options |
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| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager | Mr Pranav Vasa | Benchmark Index | NASDAQ 100 TRI |
| Issue Opens: | March 03, 2022 | Issue Closes: | March 17, 2022 |
(Source: Scheme Information Document)
The investment strategy for Navi NASDAQ 100 Fund of Fund will be as follows:
Navi NASDAQ 100 Fund of Fund will follow a passive investment strategy and will predominantly invest in Units of overseas ETF’s and/or Index Fund based on the NASDAQ-100 Index.
The scheme will invest in units of the underlying schemes based under the NASDAQ 100 index in the same proportion. The scheme endeavours to provide investors with global exposure by investing in units of underlying schemes based on the NASDAQ-100 index. The AMC/ Underlying Scheme does not make any judgments about the investment merit of the NASDAQ-100 Index, nor will it attempt to apply any economic, financial, or market analysis.
The Scheme shall invest in Units of overseas ETF’s and/or Index Fund based on the NASDAQ-100 Index, except to meet its liquidity requirements. The scheme would also invest in units of Liquid/ debt schemes, debt, and money market instruments as stated in the Asset Allocation table. However, there is no assurance that all such buying and selling activities would necessarily result in benefit for the Fund.
A small portion of the net assets will be held as cash or will be invested in debt and money market instruments permitted by the SEBI/RBI, including TREPS or an alternative investment for the TREPS as may be provided by the RBI, to meet the liquidity requirements under the Scheme.
Under normal circumstances, the Asset Allocation will be as under:
Table 2: Asset Allocation for Navi NASDAQ 100 Fund of Fund
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| 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, and Cash | 0 | 5 | Low to Medium |
^or similar instruments as may be permitted by RBI / SEBI Money Market instruments includes commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity up to one year, call or notice money, certificate of deposit, usance bills.
(Source: Scheme Information Document)
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. Based on market capitalization, it includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market. The index offers access to leading global brands and opens up the playing field for investors to participate in the international market.
Who will manage Navi NASDAQ 100 Fund of Fund?
The designated fund manager for this scheme will be Mr Pranav Vasa. He holds degrees in PGDM Finance and B.E. (Computer) and has more than 6 years of experience. In his past employment, Mr. Vasa has worked with Birla Sun Life Insurance, and he has been associated with Navi Mutual Fund since 2016.
At Navi Mutual Fund, Mr. Vasa currently manages Navi Nifty 50 Index Fund, Navi Nifty Bank Index Fund, and Navi Nifty Next 50 Index Fund.
Fund Outlook – Navi NASDAQ 100 Fund of Fund
Navi NASDAQ 100 Fund of Fund aims to passively invest in units of overseas exchange-traded funds (ETFs) and index funds that invest in the NASDAQ-100 index. The scheme offers investors with a portfolio exposure to global innovators and disruptors; it invests in innovation and growth through global value creators of the NASDAQ-100 Index.
The scheme provides investors with an easy way to invest in the largest global tech companies. Technology companies constitute 60% of the Nasdaq-100 index. The scheme provides diversification across sectors and themes, access to ‘new economy’ fast-growing sectors, and innovative path-breaking themes. It has a low correlation to the Indian equity market and allows to participate in themes largely unrepresented in the Indian market, plus it gives a hedge against currency depreciation.
Being a Fund of Fund scheme, it follows a passive approach and is available at lower costs and reduces the risk of active stock selection risk. However, do note that the scheme will invest a majority of its assets passively in international equities, which are risky in nature. The scheme will also be prone to geopolitical risk, currency risk and may face higher volatility due to dynamic global market conditions.
In addition, the threat of the Omicron variant, normalisation in policy rates in the U.S.–particularly the rate hike from March 2022, and the recent geopolitical tensions between Russia-Ukraine may have a bearing on the underlying fund’s performance. These, among many other factors, may affect the scheme’s performance, and the portfolio may face higher volatility in the near term. The scheme commands a high-risk in the riskometer.
Thus, this scheme is suitable only for aggressive investors seeking exposure to the US equity market and aiming to diversify their portfolios by investing across geographies. Ensure a high-risk appetite, a long investment horizon of at least 5-7 years, and your investment objectives align with the fund.
This article first appeared on PersonalFN here
