Axis Greater China Equity Fund of Fund NFO – Should you invest?
Axis Mutual Fund has launched Greater China Equity Fund of Fund (FoF). This fund would open for subscription on 29th January, 2021. This fund of funds would invest in Schroder International Selection Fund Greater China, an existing equity fund that delivered 50% in the last 1 year. Even during covid-19 crisis, the underlying existing fund has delivered good returns. This would tempt investors to invest in such funds. In this article we would provide Axis Greater China Equity Fund of Fund NFO issue details and whether there are any risk factors of investing in such international mutual fund schemes.
Issue details of Axis Greater China Equity Fund of Fund NFO
This is an open-ended equity mutual fund scheme. Here are the NFO issue details.
|Axis Greater China Equity Fund of Fund NFO – Issue Details|
|Scheme reopens for continous purchase/sale||Within 5 working days|
|Minimum investment (Lumpsump)||Rs 5,000|
|Minimum investment (SIP)||Rs 1,000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||a) Within 1 year – 1% if units redeemed is > 10% of investment
b) > 1 year – Nil
|Max Total expense Ratio (TER)||1.00%|
|Benchmark||MSCI Golden Dragon Index|
|Fund Manager||Mr. Hitesh Das
Mr. R. Sivakumar
What is the investment objective of Axis Greater China Equity Fund of Fund NFO?
To provide long term capital appreciation by predominantly 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.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern Axis Greater China Equity Fund of Fund NFO?
This fund investment pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Units/Shares of Schroder International Selection Fund Greater China||95%||100%||Medium to High|
|Debt Schemes, Debt and Money Market Instruments||0%||5%||Low to Medium|
Why to invest in the Axis Greater China Equity Fund of Fund?
Here are a few reasons to invest in such debt funds.
1) It is investing in existing international mutual fund scheme that invests in greater China companies and such fund has performed well. Hence in reality, one can assume that they are investing in existing mutual fund scheme.
2) Investing in global funds would help in diversification instead of investing only in Indian stocks.
3) Investing in international funds would help in getting access to international markets.
4) This fund invests majorly in greater china equity markets. Since they do not invest in domestic equities, these are classified like debt funds for taxation purpose. One can benefit from low tax rates.
Some key risk factors you should consider before you invest in such funds
One should consider some of these risk factors / negative factors before investing.
1) Global funds might not react to Indian stock markets. If SENSEX/NIFTY is going up due to bull run (which you are seeing now), you might not see that in global funds.
2) There is currency risk if you invest in global funds as the mutual fund scheme invests outside India and there can be fluctuations in forex conversion rates.
3) The geo, social and political situation of the country where the fund is investing would have an impact on the fund performance.
4) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.
Performance of existing underlying fund
This fund would invest in another global fund that invests in China equity markets. Let us look at the performance of Schroder International Select Fund Greater China.
10 Year annualized returns – 13%
5 Year annualized returns – 26%
3 Year annualized returns – 18%
1 Year returns – 50%
Should you invest in Axis Greater China Equity Fund of Fund NFO?
Axis Greater China Equity Fund of Fund invests in another fund outside India that invests in companies that are part of Republic of China, Taiwan and Hongkong. This fund has performed well in the last 5 to 10 years. However, India-China relations are not that healthy. Gland Pharma IPO over subscription proves that investors don’t care about those things. High risk investors can invest in such global funds. Moderate to low risk takers can stay away from such funds.
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