Kotak NASDAQ 100 Fund of Fund NFO – Review
Kotak Mutual Funds has launched NASDAQ 100 Fund of Fund. This New Fund Offer would open for subscription on 11th January, 2021. This is an open ended mutual fund that would invest in overseas ETFs and/or Index funds that would invest in the NASDAQ 100 Index. Since it invests in other ETFs or Index funds, it is termed as fund of fund. Should you invest in Kotak NASDAQ 100 Fund of Fund NFO? What are the various risk factors associated with such funds?
Issue details of Kotak NASDAQ 100 Fund of Fund (NFO)
This is an open-ended equity mutual fund scheme. Here are the NFO issue details.
|Kotak NASDAQ 100 Fund of Fund – NFO Issue Details|
|Scheme reopens for continous purchase/sale||09-Feb-21|
|Minimum investment (Lumpsump)||Rs 5,000|
|Minimum investment (SIP)||Rs 1,000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Max Total expense Ratio (TER)||1.00%|
|Benchmark||NASDAQ 100 Index|
|Fund Manager||Mr Devender Singhal
Mr Satish Dondapati
Mr. Abhishek Bisen (Debt)
What is the investment objective of this MF scheme?
The investment objective of this fund is to provide long term capital appreciation by investing in overseas units of ETFs and/or index fund based on the NASDAQ 100 Index.
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:
|Type of instruments||Min %||Max %||Risk Profile|
|Units of Overseas ETFs or Index Fund based on NASDAQ 100 Index||95%||100%||High|
|Debt Schemes, Debt and Money Market Instruments||0%||5%||Low to Medium|
Why to invest in the Kotak NASDAQ 100 Fund of Fund NFO?
Here are a few reasons to invest in such mutual fund schemes.
1) This fund would invest in overseas ETFs and index funds that invests in the NASDAQ 100 Index. NASDAQ 100 Index has outperformed in the last 5-10 years (20%+ annualized returns), hence investing in such index would provide superior returns to investors.
2) This fund invests in ETFs/Funds that invest in US NASDAQ 100 companies. Investors can get overseas investment exposure, which they would be investing in major companies like Google, Facebook, Amazon, etc., that are part of the NASDAQ 100 index.
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) This fund would invest in ETFs and Index funds based on NASDAQ 100 Index stocks. It is immaterial whether the underlying companies are doing good or not, such fund might invest in the underlying stocks of the index. If the underlying stocks are not good or underperforms, it would affect the returns.
2) This fund invests in the NASDAQ 100 index companies. Investments in overseas countries would have currency risk and geopolitical risks.
3) It invests some part in debt instruments which are turned to be high risk these days.
4) You can refer complete risk factors in NFO Scheme Information Document.
Performance of underlying ETFs / Index Funds
This fund would invest in existing ETFs and index funds. Here is the performance of respective ETFs / Index Funds.
1) iShares NASDAQ 100 ETF USD Acc
1 Year returns – 48%
3 year annualized returns – 27%
5 year annualized returns – 24%
10 year annualized returns – 20%
2) Lyxor NASDAQ 100 ETF Acc
1 Year returns – 33%
3 year annualized returns – 24%
5 year annualized returns – 22%
3) USAA NASDAQ 100 Index Fund
1 Year returns – 47%
3 year annualized returns – 25%
5 year annualized returns – 25%
10 year annualized returns – 19%
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Should you invest in the Kotak NASDAQ 100 Fund of Fund NFO?
Kotak NASDAQ 100 Fund of Fund invests in overseas ETFs and/or index funds that are investing in the NASDAQ 100 Index. I have recommended earlier several times to invest in Motilal Oswal NASDAQ ETF that outperformed in the last 5-10 years. Its 1 year returns is 45%, 5 year annualized return is 25% and 9.8 years annualized returns is 24.6%. Last 1 year performance is high and investors should not assume similar returns in future. While both funds invests in the NASDAQ 100 index, Motilal Oswal NASDAQ 100 ETF invests directly in this index, whereas Kotak NASDAQ 100 FoF would invest in ETFs and index funds that invests in the NASDAQ 100 index. Beyond this, there is no other major difference. High risk investors can invest in this new fund for 5-10 years time frame. Moderate to low risk investors should avoid such funds.
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