Monday, February 10, 2014


February 2014

The holy grail of investing

The holy grail of sensible investing is figuring out a good asset allocation and then rebalancing your portfolio. A Fund of Fund (FoF) does exactly this. FOFs are efficient products as they provide you with the benefit of diversification in multiple and well-researched mutual fund schemes. The first FOF was launched by Franklin Templeton Mutual Fund on October 17, 2003. Fund of Funds can be Sector specific e.g. Real Estate FOFs, Theme specific e.g. Equity FOFs, Gold based gold ETF Fund, Objective specific e.g. Life Stages FOFs or Style specific e.g. Aggressive/ Cautious FOFs etc, or overseas FoFs which invest across the globe. They invest in other domestic mutual funds (FT Life Stage Fund of Funds, Kotak Equity FoF), domestic exchange-traded funds (ETFs) (Reliance Gold Saving Fund, Kotak Gold Fund, Quantum Gold Savings Fund), or overseas mutual funds (Fidelity International Opportunities Fund, Franklin Asian Equity, Kotak Global Emerging Market Fund, BNP Paribas China-India Fund, ICICI Prudential Indo Asia Equity, Fidelity Global Real Assets Fund, and DSP BlackRock World Gold Fund).

All the GEMs that dazzled in the February 2013 GEMGAZE have retained their pre-eminent position in the February 2014 GEMGAZE also.


FT India Life Stage Fund of Funds Gem

Franklin Templeton AMC offers five plans based on life stages that will suit your age profile - FT India Life Stage FoF 20s, FT India Life Stage FoF 30s, FT India Life Stage FoF 40s, FT India Life Stage FoF 50s Plus, and FT India Life Stage FoF 50s Floating Rate. The first four plans were launched in November 2003 and the last plan was launched in July 2004. All these are plans of a single fund that has assets of around Rs 81 crore. The AUM of each plan is Rs 9 crore, Rs 7 crore, Rs 12 crore, Rs 10 crore, and Rs 43 crore respectively. The top three sectors in the portfolio are finance, energy, and technology. The allocation to equity tapers from 81% in the first plan to a measly 20% in the last plan. The one-year returns of the plans are 0.57%, 1.68%, 2.96%, 2.7%, and 6.69% respectively. While the expense ratio for all the plans is 1.33%, 1.5%, 1.62%, 1.66%, and 0.79% respectively, the portfolio turnover ratio hovers around 4%.

ICICI Prudential Advisor Fund   Gem


ICICI Prudential Mutual Fund offers Fund of Funds through five plans launched in November 2003: ICICI Prudential Advisor–Very Aggressive, ICICI Prudential Advisor–Aggressive (ICICI Prudential Advisor Series - Long Term Savings Plan w.e.f. December 6, 2013), ICICI Prudential Advisor–Moderate, ICICI Prudential Advisor–Cautious, and ICICI Prudential Advisor–Very Cautious. The AUMs of the Very Aggressive, Aggressive, Moderate, Cautious, and Very Cautious Plans are Rs 4 crore, Rs 6 crore, Rs 5 crore, Rs 3 crore, and Rs 1 crore respectively. The top three sectors in the portfolio are finance, technology, and energy. The allocation to equity is 71%, 69%, 54%, 34%, and 0% respectively. The one-year returns of the plans are 1.03%, -0.71%, 1.84%, 0.66%, and 5.29% respectively. While the expense ratio for all the plans is the same at 0.75%, the portfolio turnover ratio is 257%, 205%, 206%, 208%, and 0% respectively.


Birla Asset Allocation Plan   Gem

Birla Asset Allocation Plan is an open-ended fund of funds, launched in January 2004, which offers three plans – Aggressive, Moderate, and Cautious. The AUM of Aggressive, Moderate, and Cautious Plans is Rs 8 crore, Rs 4 crore, and Rs 3 crore respectively. The allocation to equity is 79%, 57%, and 23% respectively. The one-year returns of the plans are 1.51%, 1.94%, and 1.63% respectively.

FT India Dynamic PE Ratio Fund of Funds   Gem

P/E funds are funds which rebalance their portfolios to take advantage of market movements. They base their investment strategy on some pre-determined P/E ratios of an index like Sensex or Nifty.
FT India Dynamic PE Ratio Fund of Funds redirects your money into two good funds from the Franklin Templeton stable – Franklin Bluechip Fund and Templeton Income Plan. FT Dynamic PE Fund pegs its equity-debt mix to the Nifty’s price-earnings multiple. If the Nifty PE is below or equal to 16 times, the fund can invest its entire portfolio in equities. If the PE moves above 16 times, it cuts equity allocation to 50-70%. Should the Nifty PE move beyond 24 times, the fund can shift into debt and out of equities. This translates into selling stocks at highs and buying them on declines. By end-September 2013, the fund held 75% in Franklin Bluechip and 25% in Templeton India Income Fund. The AUM of the fund is an impressive Rs 992 crore. The top three sectors in the portfolio are finance, energy, and technology. This predominantly large cap fund has an allocation to equity of 61% at present. The key argument for investing in the FT Dynamic PE Fund is its ability to keep up with balanced funds during bull phases, while containing losses well during bear phases. Consider its track record. The fund’s five-year return of 16.3% is on par with the balanced funds category. For three years, its return of 5% is well above both balanced and equity large-cap funds. But where the fund is head and shoulders above competition is in shielding its investors during market falls. During the 2011 crash, this fund lost just 5%, while balanced funds, on an average, lost 16% and equity funds averaged a 24% loss. The one-year return of the fund is 1.2% as against the category average of 1.45%. While the expense ratio is at 1.45%, the portfolio turnover ratio is 25%. 

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