HDFC Developed World Indexes Fund of Fund – Review

HDFC Developed World Indexes Fund of Fund – Review

HDFC Developed World Indexes Fund of Fund – ReviewHDFC Developed World Indexes Fund of Fund – Review

HDFC MF has launched World Developed Indexes Fund of Fund (FoF) which would open for subscription on 14th September 2021. This fund would invest in overseas index funds or ETFs which will be in aggregate track MSCI World Index. There are no similar funds in the market in India as of now, hence we do not know how the performance of such schemes would be. Should you subscribe to HDFC Developed World Indexes Fund of Fund NFO?

Also Read : Best Performing Mutual Funds in the last 15 years

HDFC Developed World Indexes Fund of Fund [NFO] Issue and Scheme Details

Name of the Scheme: HDFC Developed World Indexes Fund of Fund (FoF)

NFO Period: This fund would open for subscription on 14th September 2021 (Tuesday) and closes on 28th September 2021 (Tuesday). Since it is an open-ended scheme, it reopens for further subscription after 5 working days from closure.

Where does the scheme invest: It is an open-ended MF scheme investing in units/shares of overseas Index Funds and/or ETFs which will in aggregate track the MSCI World Index.

Plans available: It has both HDFC Developed World Indexes FOF – Regular Plan and HDFC Developed World Indexes FOF – Direct Plan.

Further like any other fund, it provides Growth, Payout of Income Distribution cum capital withdrawal (IDCW) & Reinvestment of Income Distribution cum capital withdrawal (IDCW)

Minimum Application Amount: Rs 5,000 and in multiples of Rs 1,000 there-of.

Load Structure: Entry load is nil and exit load would be 1% if redeemed within 1 month.

Fund Manager: Mr. Krishan Kumar Daga

Benchmark Index: MSCI World Index

Total Expense Ratio: 1%

Taxation of returns: Returns from this global fund would be like debt funds taxation.

HDFC Developed World Indexes Fund of Fund SID

What is the investment objective of this MF scheme?

The investment objective of the scheme is to provide long-term capital appreciation by passively investing in units/shares of overseas Index Funds and/or ETFs which will in aggregate closely correspond to the MSCI World Index, subject to tracking errors.

There is no assurance or guarantee that the investment objective of the scheme will be realized.

What is the allocation pattern in this mutual fund?

This fund investment pattern is as follows :

1) It would invest 95% to 100% in Units/Shares of overseas Index Funds and/or ETFs.

2) It would invest up to 5% in Debt and Money Market Instruments.

In which Index Funds or ETF does HDFC Developed World Indexes Fund invests?

Currently it would invest in the following index funds / ETFs and as per the weightage.

1) CSIF (IE) MSCI USA Blue UCITS ETF – Weightage 67.6%

Captures large and mid-cap equities in the U.S. The index covers approximately 85% of the free float-adjusted market capitalization of the U.S. equity universe.

2) CSIF (Lux) Equity Europe – Weightage 19.1%

Captures large and mid-cap equities across 15 Developed Markets countries in Europe. The index covers approximately 85% of the free float-adjusted market capitalization of the European equity universe.

3) CSIF (Lux) Equity Japan – Weightage 6.6%

Captures large and mid-cap equities in Japan. The index covers approximately 85% of the free float-adjusted market capitalization of the Japanese equity universe.

4) CSIF (Lux) Equity Pacific ex Japan – Weightage 3.3%

Captures large and mid-cap equities across Developed Markets countries in the Pacific region (excluding Japan). The index covers approximately 85% of the free float-adjusted market capitalization of the Pacific ex Japan equity universe

5) CSIF (Lux) Equity Canada – Weightage 3.3%

Captures large and mid-cap equities in Canada. The index covers approximately 85% of the free float-adjusted market capitalization of the Canadian equity universe.

Why to invest in HDFC Developed World Indexes Fund of Fund?

Here are a few reasons to invest in such funds.

1) This fund would invest in overseas index funds and ETFs of developed countries. It invests majorly in developed countries like US and Europe and small portion in Japan, Asia Pacific and Canada. Investing in global indexes of developed countries is a good bet for medium to long term.

2) Investing in international index funds or ETFs would help in diversification as well as access to international markets.

3) The returns from such funds are tax efficient. These funds are classified like debt funds for taxation purpose. One can benefit from low tax rates on the returns.

Risk factors of investing in such funds

One should consider some of these risk factors / negative factors before investing.

1) International funds might not react to the Indian financial markets. If SENSEX/NIFTY is going up due to bull run, you might not see that in international mutual funds.

2) Since this is global fund, there are currency risks and country risks.

3) It invests some portion in debt instruments where there is interest rate risk.

4) Investors need to bear recurring expenses of the scheme in addition to the expenses of the underlying scheme.

5) You can refer complete risk factors of investing in this scheme in SID / KIM / NFO prospectus.

Performance of existing funds in similar category

Currently there are no mutual funds in similar category for comparison.

Also Read: Top Flexicap Funds to invest in India

Should you invest in HDFC Developed World Indexes Fund of Fund?

HDFC Developed World Indexes Fund of Fund (FoF) invests in overseas index funds and ETFs. It invests majorly in developed countries like US and Europe and small portion in other countries. Bull run or bearish stock markets in Indian economy would not have a major impact of such funds as they do not invest in Indian equities. Investing in international or global fund is high risk. There are geo-political and currency risks. Currently global economies are in bull run even during this covid-19 pandemic. This scheme is new which invests across 5 different ETFs / Index. We do not know how such combination of underlying funds would work in future. Investors need not be in a hurry to invest in such schemes now. Once we understand how such combination works, one can invest in such funds.

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2 thoughts on “HDFC Developed World Indexes Fund of Fund – Review”

  1. Good to know, I know similar options are not available so far to compare but, how do you still assess this FOF . Should we try our luck assuming that it will offer handsome returns over long term ?

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