Portfolio diversification can provide an opportunity for investors to benefit from different market cycles. Given the current market environment, investors are considering an allocation to international equity funds that allow you to invest in the top firms and a variety of sectors/themes all over the world.
Indian markets have a low correlation with NASDAQ-100. Investors may consider adding exposure to NASDAQ-100, which will improve portfolio performance and reduces risk. 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 NASDAQ 100 index. This index provides domestic investors access to the world’s seven largest companies by market caps, such as Apple, Microsoft, Tesla, Alphabet, Amazon, NVIDIA, and Meta Platforms.
Invesco Mutual Fund brings an opportunity for Indian investors to invest in NASDAQ-100 based Fund of Fund. It has launched Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund, an open-ended scheme that will be investing in its parent firm’s European-based fund – Invesco EQQQ NASDAQ-100 UCITS ETF, which has exposure to the US’s NASDAQ 100 stocks. Participation in the underlying fund through this scheme gives an opportunity to domestic investors to diversify their portfolio globally and access to businesses not listed in India.
Commenting on the NFO launch, Mr Saurabh Nanavati, Chief Executive Officer at Invesco Mutual Fund, said, “The NASDAQ-100 is more than just an index; it is home to the world’s most influential and innovative companies* like Apple, Amazon, Microsoft, Tesla, Alphabet etc. Further, the NASDAQ-100 is not limited to the technology sector alone it is home to disruptors and leading names from diverse sectors, including consumer discretionary, healthcare, and others. It is no surprise that these companies are transforming the world and present a strong investment opportunity.”
“Our global firm manages over US$ 423bn of global ETFs alone (Overall AuM of US$1.5 trillion)1 and manages one of the largest funds tracking the Nasdaq-100 Index. As a firm, we are committed to bringing newer investment strategies into India for our Indian Investors by leveraging into our parent’s global investment capabilities.”
The Scheme will provide an opportunity to introduce Invesco’s product range and investment capabilities to investors in India.
Table 1: Details of Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund
| Type | An open-ended fund of fund scheme investing in Invesco EQQQ NASDAQ-100 UCITS ETF. | Category | Fund of Fund (Overseas) |
| Investment Objective | To generate returns by investing predominantly in units of Invesco EQQQ NASDAQ100 UCITS ETF, an overseas exchange-traded fund, which seeks to provide investment results which, before expenses, generally correspond to the price and yield performance of the NASDAQ-100 Notional Index (Net Total Return) in USD. However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns. | ||
| SIP/STP/SWP | Available | ||
| Min. Investment | Rs 1,000/- and in multiples of Re 1/- thereafter. Additional Purchase Rs 1,000/- and in multiples of Re 1/- thereafter. | Face Value | Rs 10/- per unit |
| Plans |
|
Options | Growth |
| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager |
|
Benchmark Index | NASDAQ-100 Notional Index (Net Total Return) |
| Issue Opens: | March 30, 2022 | Issue Closes: | April 13, 2022 |
(Source: Scheme Information Document)
The investment strategy for Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund will be as follows:
Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund will follow a passive investment strategy. It will invest 95% of its net assets in units of Invesco EQQQ NASDAQ-100 UCITS ETF and the remaining 5% of the net assets in domestic debt and money market securities / Units of debt and liquid schemes of Invesco Mutual Fund.
The Underlying Fund, Invesco EQQQ NASDAQ-100 UCITS ETF, is domiciled out of Ireland; it aims to replicate the performance of the NASDAQ-100 Notional Net Total Return Index. It provides exposure to the 100 largest US and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization.
The scheme will invest in units of the underlying scheme based under the NASDAQ 100 Notional index in the same proportion. The scheme will invest in units of the underlying scheme, subject to tracking errors.
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 in 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 Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Shares of Invesco EQQQ NASDAQ-100 UCITS ETF^ | 95 | 100 | High |
| Debt and money market securities / Units of debt and liquid schemes of Invesco Mutual Fund | 0 | 5 | Low to Medium |
^Investors are requested to note that shares of Invesco EQQQ NASDAQ-100 UCITS ETF should be considered similar to units of the Fund.
(Source: Scheme Information Document)
About the Benchmark
The NASDAQ-100 Index includes 100 of the largest US and international non-financial securities listed on the NASDAQ Stock Market (NASDAQ) based on market capitalisation. The index reflects companies across major industry groups, including computer hardware and software, telecommunications, retail/wholesale trade, and biotechnology. It does not contain securities of financial companies, including investment companies. The NASDAQ-100 Index is one of the world’s pre-eminent large-cap growth indexes.
Here’s the list of top constituents by weightage and sector representation under the index:
(The underlying scheme mirror’s the index constituents in the same proportion)
(Source: Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund PPT)
On April 05, 2011, NASDAQ OMX announced that the NASDAQ-100 Index would undergo a Special Rebalance in order to bring the weights of the index securities closer in line with their actual market capitalizations.
Who will manage Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund?
Mr Neelesh Dhamnaskar and Mr Krishna Cheemalapati will be the designated fund managers for this scheme.
Mr Neelesh Dhamnaskar is a Commerce Graduate and holds MMS (Finance) degree. He has around 16 years of experience in equity research. Prior to joining Invesco Mutual Fund, where he is the dedicated fund manager for making an investment in foreign securities, he has worked with ENAM Securities Direct Pvt. Ltd., KR Choksey Shares and Securities Pvt. Ltd. as an Equity Research Analyst, and Anand Rathi Securities Ltd. Commodities as Research Analyst.
At Invesco AMC, Mr. Dhamnaskar focuses on investment in foreign securities. Currently, he manages Invesco India Feeder – Invesco Pan European Equity Fund, Invesco India Feeder – Invesco Global Equity Income Fund, Invesco India – Invesco Global Consumer Trends Fund of Fund, Invesco India Infrastructure Fund, and Invesco India Midcap Fund.
Mr Krishna Cheemalapati is a CFA (ICFAI, Hyderabad) and has completed B.E. (ECE) and PGDBA. He has more than 23 years of experience in the Fixed Income market. Prior to working with Invesco Mutual Fund, he was associated with Chief Investment Officer – Reliance General Insurance Company Ltd.
At Invesco AMC, Mr. Cheemalapati currently manages Invesco India Gilt Fund, Invesco India Short Term Fund, Invesco India Corporate Bond Fund, Invesco India Banking & PSU Debt Fund, Invesco India Credit Risk Fund, Invesco India Medium Duration Fund, Invesco India Treasury Advantage Fund, Invesco India Money Market Fund, Invesco India Ultra Short Term Fund, Invesco India Fixed Maturity Plans of varying maturities, Invesco India Gold Fund, Invesco India Gold Exchange Traded Fund, Invesco India Equity & Bond Fund, Invesco India Equity Savings Fund, Invesco India – Invesco Global Consumer Trends Fund of Fund, Invesco India Overnight Fund and Invesco India Liquid Fund.
Fund Outlook – Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund
Invesco India – Invesco EQQQ NASDAQ-100 ETF Fund of Fund aims to invest in units of Invesco EQQQ-NASDAQ UCITS ETF in a similar proportion to generate parallel returns, subject to currency movements and tracking errors. The scheme offers investors a portfolio exposure to global innovators and disruptors; it invests in innovation and growth through global value creators of the NASDAQ-100 Index.
The underlying scheme tracks the NASDAQ-100 index; it provides diversification across sectors and themes, access to ‘new economy’ fast-growing sectors, and innovative path-breaking themes. NASDAQ-100 companies have strong brand equity, valuable patents, and economies of scale that may drive product demand and pricing power. The scheme provides investors an easy way to invest in the largest global tech companies.
The scheme has a low correlation to the Indian equity market and has invested scale and 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. The fortune of this scheme will depend on the performance of the underlying fund.
In addition, the threat of the ‘Omicron’ variant at the global level, plus certain central banks of the world’s increasing policy rate amidst inflationary pressures, 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 who are looking to tap the growth potential of companies comprising the NASDAQ-100 Index and diversify their portfolio by investing beyond home country. Ensure a high-risk appetite, long investment horizon of at least 5-7 years, and your investment objectives align with the fund.
This article first appeared on PersonalFN here
