Axis Mutual Fund (MF) has rolled out a new scheme that will invest in an international fund, which in turn buys shares of companies listed across the globe. Called the Axis Global Innovation Fund of Fund (AGI FoF), this scheme will invest its entire corpus in Schroder International Selection Fund Global Disruption (SISF). Now, SISF is global fund that invests across different geographies and sectors.
The scheme
Axis MF wants to capitalise on companies that are a part of disruption caused due to the spread of the COVID-19 pandemic. The international fund invests in companies from sectors that have benefited from adopting new technologies. These include education and health technologies, cloud computing firms, as also companies in the e-commerce and fintech spaces.
Apart from investing in US-based technology stocks, in which many existing international funds from India have taken exposure, this scheme can also invest other global companies. The list would include names such as BioNTech (the German company that has tied up with Pfizer to make the COVID-19 vaccine), AstraZeneca, PayPal, Netflix and Spotify.
Schroder Singapore Holdings, the wholly owned arm of Schroder, UK, holds a 25 percent stake in Axis MF. Hence, Axis MF has consistently offered Schroder’s international offering to its Indian investors. At times, it invests around 30 percent of its Indian schemes in international markets, based on Schroder’s recommendations (Axis Growth Opportunities Fund, Axis ESG Equity Fund and Axis Special Situations Fund). At other times, it has launched fund of funds (Axis Global Equity Alpha FOF, Axis Greater China Equity FOF).
Being a thematic fund, Ashwin Patni, Head Products and Alternatives at Axis MF, says that it’s better to diversify globally instead of just sticking to one country.
What works
AGI FoF is among the few globally diversified mutual funds that are out there. Most international mutual funds are focused on US markets. PGIM Global Equity Opportunities and Sundaram Global Brand funds are the other schemes that offer global diversification.
As per its note, SISF has invested a little over 60 percent of its assets in US markets and the rest across emerging markets, Europe, Japan and UK among a few other regions. “Such geographical diversification is important, as one international market cannot outperform at all points of time,” says Ravi Kumar TV, co-founder of Gaining Ground Investment Services.
Gavin Marriott, investment director-Global and International Equities at Schroders, says the fund will at all times avoid companies that are not sensitive to disruptive technologies or businesses and do nothing to adapt to such changes.
The fund has done well in the past. Its one-year return is 66.6 percent and has given a compounded annualised return of 33.4 percent since its inception in December 2018. Of course, past returns are no guarantee for future performance, and the international fund is relatively new.
Axis’ domestic equity and debt funds have done exceedingly well and across categories. This gives comfort as to the fund house’s strategy.
What doesn’t work
Adverse currency movements can bring down the returns, especially if the Indian Rupee appreciates. A strengthening rupee against the dollar will not be favourable for your returns, while a weakening rupee is beneficial. The international fund is dollar denominated, but it invests in companies globally, so other currencies’ risks will also be a factor here.
Investing across the globe also entails the fund manager being well-versed with the laws of those countries and how they can impact the underlying sectors and companies in which the fund invests in. But with the fund house spread in 37 locations across the globe, this isn’t a big worry.
Moneycontrol’s take
It’s important to invest globally as that brings about diversification to your portfolio. AGI FoF is a fund investing in a theme that is promising. But given the short history of its international fund, it’s better to wait for 2-3 years before you make any meaningful allocation to it. The new fund offer (NFO) is open till May 21, 2021.Disclaimer: The views and investment tips by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decision.