SBI AMC is launching a NFO, which is set to open for subscription from March 1st, 2021 and closes on March 15th, 2021.
Investment Objective: To generate wealth over the long term, suitable for investors having a very high risk appetite who are comfortable with very high levels of volatility.
Investment Strategy: The fund emphasizes on the American Markets and invests through Fund-of-Fund(FOF). FOF is a strategy where a scheme decides to invest in another existing mutual fund scheme(s) instead of investing in stocks directly. The fund is mandated to have at least 80% of its investments in companies which are listed in the American Stock Exchange. The focus is to create returns which can directly correlate with the USA Markets by also having an additional preference towards companies complying with ESG.
Fund Manager: Mohit Jain
Benchmark: S&P 500
Minimum Lumpsum Investment Amount: Rs 5,000
Minimum SIP Investment Amount: Rs 1,000
Fund Management Process:
- The fund management style is passive as it invests in an already existing mutual fund scheme(s).
- The underlying mutual fund is managed by an International AMC named AMUNDI.
- AMUNDI constructs and reviews its portfolio of stocks by applying several layers of filters which are as follows:
- Investment Universe is defined from Russel 1000 Index and S&P 500 Index
- Carry out ESG analysis and discard companies which fare poorly
- Analyze the financial strength, competitive advantage and possible upside of the shortlisted companies
- Build a portfolio consisting of 40 to 70 stocks with high conviction and expectations of having above average risk adjusted returns
4. Any changes in the underlying fund(AMUNDI fund) will reflect in the main fund(SBI FOF)
The American stock exchange boasts of having the best companies in the world. Names like Facebook, Amazon, Apple, Google, Netflix, Nike, Tesla, etc are not just expensive to buy as a single stock but is hurdled with several regulatory issues, making it more complicated to invest in International Markets directly. Exposure to many of the big names can be easily accessed by investing in a mutual fund which has a dedicated fund manager to look after its portfolio and carry out the necessary changes when required.
Based on our analysis, we have observed the following pros and cons:
- Mitigating risk by diversification through International Markets
- Focuses on companies which are global leaders
- Opportunity to take part in American growth story
- ESG oriented philosophy of investing
- Market Cap Agnostic
- Taxation is a replica of Debt Mutual Funds, providing Indexation benefit for a holding period of more than 3 years
- Limited majorly to just American Markets
- Scope for very high returns may not be possible as the American Markets are nearing saturation levels owing to its nation's supremely developed economy.
- Emerging market like India pose a threat by having the potential to deliver superior returns in the longer run
- Currency risk (The Dollar-Rupee Value keeps fluctuating and can affect the overall investment amount)
This fund does not have an active fund management but focuses more on the concept of FOF and diversification through investments in the markets of USA. Investors who would like to get an exposure to global markets can consider investing in this fund as it is cost efficient and easily accessible. But at the same time, risk involved is comparatively higher and the product as such is slightly complex to understand.
It is of utmost importance that the fund should be discussed with your financial advisor and then ascertain whether it is suitable to invest. Always read the scheme documents fully before investing.