GEMGAZE

February 2015

Taste FoF, but not with a blind eye!

There are a plethora of schemes on offer from the Indian mutual fund industry. So, why should an investor pick up FoF which is a basket of various mutual fund schemes? Touted as ‘one-stop’ shop for investment needs, these funds are designed to offer benefits like access to portfolio of various top-performing funds with just one investment, diversification across asset classes and investment styles, free from worries of choosing and buying or selling of stocks and the in-built rebalancing feature which ensures that market movements do not change the desired asset allocation. Normally, market movements make asset allocation go awry and frequent rebalancing is cumbersome and is inefficient from a tax perspective. FoF simplifies the investment process for investors who currently have to invest in a range of schemes to achieve their desired asset allocation. The different style attributes mitigate the risk contribution by each component.

All the GEMs from the 2014 GEMGAZE have performed reasonably well in the past one year and figure prominently in the 2015 GEMGAZE too.

FT India Lifestage 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 83 crore. The AUM of each plan is Rs 13 crore, Rs 7 crore, Rs 13 crore, Rs 11 crore, and Rs 39 crore respectively. The top three sectors in the portfolio are finance, chemical, and engineering. The allocation to equity tapers from 80% in the first plan to a measly 20% in the last plan. The one-year returns of the plans are 49.24%, 36.87%, 28.92%, 20.08%, and 17.1% respectively. While the expense ratio for the plans is 1.29%, 1.42%, 1.53%, 1.56%, and 0.79% respectively, the portfolio turnover ratio is 8%, 10%, 10%, 8%, and 6% respectively.

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 5 crore, Rs 7 crore, Rs 5 crore, Rs 3 crore, and Rs 0.88 crore respectively. The top three sectors in the portfolio are finance, technology, and energy. The allocation to equity is 20.03%, 53.37%, 43.35%, 32.59%, and 0% respectively. The one-year returns of the plans are 32.17%, 37.04%, 31.05%, 25.64%, and 12.63% respectively. While the expense ratio for the plans is 0.75%, 0.74%, 0.74%, 0.74%, and 0.68% respectively,  the portfolio turnover ratio is 112%, 54%, 71%, 12%, 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 11 crore, Rs 5 crore, and Rs 3 crore respectively. The top three sectors for all the plans are finance, automobile, and engineering. The allocation to equity is 73.7%, 55.03%, and 24.46% respectively. The one-year returns of the plans are 46.72%, 37.77%, and 26.07% respectively. The expense ratio for all the plans hovers around 0.02%.

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 India Bluechip Fund and Franklin India Short-term Income Plan. At present, the fund holds 49.42% in Franklin Bluechip Fund and 50.62% in Franklin India Short-term Income Plan. The AUM of the fund is an impressive Rs 822 crore. The FT India Dynamic PE Ratio Fund of Fund typically cuts down its equity exposure when the valuations rise. The fund, the oldest scheme in this segment, invests 50 to 70% of the money in equity funds if the weighted average PE of CNX Nifty falls between 16 and 20. When the Nifty PE quotes between 20 and 24, equity allocation stands at 30-50%. If the Nifty PE falls below 12, then the allocation to equity is in the range of 90 to 100%. The top three sectors in the portfolio are finance, energy, and technology. This predominantly large cap fund has an allocation to equity of 49% at present. The one-year return of the fund is 31.4% as against the category average of 31.44%. While the expense ratio is at 1.67%, the portfolio turnover ratio is 70%.