PremiumICICI Prudential Strategic Metal & Energy Equity Fund of Fund invests in an offshore fund—First Trust Strategic Metal and Energy Equity UCITS Fund, which is managed by an American financial services firm - First Trust Advisors L.P.
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ICICI Prudential AMC launched a unique Fund of Fund (FoF)—ICICI Prudential Strategic Metal & Energy Equity Fund of Fund, which gives exposure to the global companies in gold mining and oil & gas sector.
The scheme invests in an offshore fund—First Trust Strategic Metal and Energy Equity UCITS Fund, which is managed by an American financial services firm - First Trust Advisors L.P.
The underlying is an actively managed fund with low-track record as it was launched only in February 2021. Since inception, the fund delivered 17.21% against its benchmark return on 12%.
The NFO (new fund offer) for the ICICI’s FoF opened for subscription on 17 January 2022 and closes on 31 January 2022.
Why oil & gold?
The AMC told Mint that the fund gives exposure to global gold and oil equity companies, which otherwise are not present in India. It also highlighted that the scheme aligns with ICICI’s philosophy on shift to ‘value’ strategy.
Stating that the top two imports here are oil and gold, the fund house points that the strategy is a hedge against potential declines in the rupee as a result of potential spikes in oil and gold prices.
This is reflected in the investment process, which is designed to assign portfolio weightage to both the commodities based on rupee movement.
As on December 2021, the fund has an exposure towards oil & gas and gold mining companies to an extent of 69% and 31%, respectively.
What do experts say?
“Key risks to watch out for are disruption caused due to a shift in demand towards electric vehicles. Also, traditional fuels like diesel and gasoline are gradually getting replaced by other low-emission fuels like hydrogen and renewable fuels," said Suvajit Ray, head of products, IIFL Securities.
But considering that there is a long way to go before the transition and India continues to import oil and gold commodities, experts believe that investors with high-risk appetite can park a portion of their portfolio.
Santosh Joseph, founder at Germinate Investor Services LLP, said, “Investing in these commodities will off-set the impact of prices going up (inflationary pressure) since your portfolio also goes up. And any return from rupee depreciation will be a bonus."
Sriram B.K.R., senior investment strategist at Geojit Financial Services, said it will benefit “Only those with understanding about sectoral funds and their cycles and those who are already having international exposure but would like to have non-tech portfolio and more into energy and metals."
“The investment should be only part of a tactical allocation of not more than 10-15% of investor’s portfolio," Joseph concluded.
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