ICICI Prudential MNC Fund NFO – Should you invest in MNC funds now?
ICICI Prudential MNC Fund NFO Review
MNC Funds were rocking till couple of years back with its solid investment strategy. To tap the opportunities, ICICI Prudential has come up with an MNC fund now. ICICI Prudential MNC fund would open for subscription on 28th May, 2019. MNC Mutual Funds would invest in MNC companies that have operations and listed in India or Indian companies that have operations globally. What are MNC Funds and how do they work? What are the features of ICICI Prudential MNC Fund NFO? How are other MNC Mutual Funds are Performing now in India? Should you invest in ICICI Prudential MNC Fund or avoid it?
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What are MNC Mutual Funds and How do they work?
MNC Mutual Funds are concentrated on Multi National Corporation (MNC) theme. Such fund would invest in 3 categories
1) Indian listed companies that have global presence / Operations
2) Multinational companies whose base country is outside India, but have operations in India
3) MNCs who are outside India and not listed in India
E.g. MNC funds can invest in Maruti Suzuki which is joint venture between Maruti and Suzuki (MNC) company. MNC companies are likely to have less corporate governance issues and good cash flow. These are encashed by the mutual fund managers by investing in such companies. Even delisting of MNC companies in India provides opportunities for investment in this space as share price goes up during that period.
Features of ICICI Prudential MNC Fund NFO
This is an open-ended mutual fund equity scheme.
This scheme would open for subscription on 28th May, 2019
This scheme would close for subscription on 11th June, 2019.
Since this is an open ended scheme, it would again open for subscription after 5 business days from the date of allotment of Mf units after the NFO period. Means this would reopen for subscription on 19th June, 2019.
This scheme is available in both regular and direct plans.
This plan offers both growth option and dividend option.
This scheme is available for lump sum and SIP investment.
Minimum investment is Rs 500 and in multiples of Rs 1 there-off for lump sum investments.
Minimum investment is Rs 500 per month for monthly SIP and for a tenure of 12 months.
The NAV of the NFO is Rs 10 per unit now during initial subscription.
There is no entry load to invest in this mutual fund scheme.
There is no exit load for this scheme.
This scheme is classified as HIGH-risk scheme.
Scheme total expense ratio (TER) is estimated upto 2.25% of the total assets on any day.
ICICI Prudential MNC Fund NFO details can be downloaded from here.
What is the investment objective and strategy of this ICICI Prudential MNC Fund NFO?
The primary objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related securities within MNC space.
Who can invest in this mutual fund scheme?
Any of the following can invest in this scheme in this scheme.
1) Resident Individuals
2) Resident Indian Nationals, including partnership forms, companies, Banks, HUFs, Sole Proprietorship etc.,
4) Foreign Portfolio Investors
Who is the Fund Manager of ICICI Prudential MNC Fund NFO?
The Fund Managers are Mr. Anish Tawakley and Mr. Lalit Kumar
What is the benchmark for this scheme?
The benchmark for this scheme is Nifty MNC TRI Index.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern is as follows:
1) It invests 80% to 100% in equity and equity related Instruments within MNC space. The risk profile in this segment is high.
2) It invests 0% to 20% in other equity and equity related instruments. This risk profile in this segment is medium to high.
3) It invests 0% to 20% in debt and money market instruments. The risk profile in this segment is Low to Medium.
4) It invests 0% to 20% in Gold, Gold ETFs, units issued by REIts and InvITs. The risk profile in this segment is Medium to high.
Can NRI invest in this MF scheme?
Yes, NRIs can invest in this mutual fund scheme. They can invest on repatriation or non repatriation basis.
Why to invest in ICICI Prudential MNC Fund?
Here are few reasons to invest in this fund.
1) Many experts believe that MNC companies are transparent in terms of management, cash flow, balance sheet and absence of corporate governance issues. Investing in such MNC companies would provide good and stable returns.
2) These funds are expected to be less volatile and provide steady returns.
3) Many MNC companies are doing good in terms of revenues and margins which provides potential to invest in MNC space.
4) MNC companies share prices appreciate during de-listing which can be encashed by mutual fund schemes.
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) MNC funds that invests in stocks that are from outside India and has operations in India are getting benefitted mostly due to delisting as the share price goes up. This would be for short term investment only. No benefits in long run.
2) It invests upto 80% in equity which is high risk. In case of stock market correction, you would see huge fall in NAV.
3) MNC funds gave handsome returns in the last 5-10 years, however the scope is reduced now as many MNC companies that have operations in India are delisting them in India.
4) It invests some amount in Gold and Gold ETFs which has been flat in the last 3-4 years.
5) It invests in some MNC companies (MNC registered outside India, but has operations in India), where the major control is from base country. If there is any change in GEO / Political issues in such base country, the impact could be seen in its entity in India operations.
How is the Performance of MNC Mutual Funds in India?
Currently there are few MNC Mutual Funds, let us quickly check the performance.
1) Aditya Birla Sun Life MNC Mutual Fund
This mutual fund gave 21% annualized returns in the last 10 years, 18% annualized returns in the last 5 years, 9% annualized returns in the last 3 years and 2% returns in the last 1 year.
This fund gave 19% annualized returns since inception of 1994 and has AUM of Rs 3,700 Crores. This is 25 years old fund.
This fund portfolio consists of Honeywell, Gillette, Pfizer, Kotak Mahindra Bank, Bayer Cropscience, Thomas Cook India, IDFC First Bank, Johnson Controls and Bata India.
This fund has 0.76 Beta (< 1 is good) and Alpha (-3). Means it is generating 3% lower returns compared to benchmark.
2) UTI MNC Mutual Fund
This mutual fund gave 19% annualized returns in the last 10 years, 15% annualized returns in the last 5 years, 9% annualized returns in the last 3 years and -2% returns in the last 1 year.
This fund gave 17% annualized returns since inception of 1998 and has AUM of Rs 2,100 Crores. This is 20 years old fund.
This fund portfolio consists of Maruti Suzuki, Hindustan Unilever, Britannia Industries, Sanofi India, United Spirits, GSK Consumer Healthcare, Honeywell Automation etc.,
This fund has 0.76 Beta (< 1 is good) and Alpha (-3.9). Means it is generating 3.9% lower returns compared to benchmark.
3) SBI Magnum Global Fund
This mutual fund gave 17% annualized returns in the last 10 years, 13% annualized returns in the last 5 years, 8% annualized returns in the last 3 years and -2% returns in the last 1 year.
This fund gave 14% annualized returns since inception of 1994 and has AUM of Rs 3,580 Crores. This is 20 years old fund.
This fund portfolio consists of Colgate, Divi Labs, ABB, Hindustan Unilever, Grindwell Norton, Ambuja Cement, GSK Consumer Healthcare, Nestle India, P&G Hygiene, SFK India etc.
This fund has 0.61 Beta (< 1 is good) and Alpha (-3.1). Means it is generating 3.1% lower returns compared to SENSEX.
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Should you invest in the ICICI Prudential MNC Fund NFO?
ICICI Prudential MNC Fund invests in MNC Space (MNC in India with Operations outside India, MNC outside India, but has operations in India and MNCs have operations outside India). This space has been rocking in the last 5-10 years with enormous opportunities. However, it is not that greener any more. We could see the performance of MNC funds that gave returns which are just above FD returns. There are opportunities in this space now, however grabbing it on time is difficult. Investors can invest 10% of their portfolio in MNC Mutual Funds by picking up the right MNC fund. If you want to test new MNC fund, you can invest in this NFO, otherwise you can invest in existing MNC funds which are already there in the market. Alternatively, you can invest in diversified or multi cap mutual funds that can provide better returns.
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excellent review ,thanx
thank you vilasraj
Thank you VS Narayanan
The space is overcrowded with a plethora of MNC Funds.Better to wait upto 19 th June ,verify the portfolio and take a call.Absolutely no hurry.
Your analysis is unbiased.
Thanks for your comments Ramakrishna