Axis Global Equity Alpha Fund of Fund NFO: Should you invest?

September 2020

3 min read

 

Global equities have received a lot of attention from the investors due to their outperformance as compared to Indian stocks. Looking at Investors’ interest, a lot of fund houses launched active and passive NFOs catering to international equity markets. One of the new entrants in this space is the Axis Global Equity Alpha Fund of Fund NFO. In this NFO review, we will look at the characteristics of this fund; how it is different from existing global equity funds; and whether you should invest in it.

Axis Global Equity Alpha Fund of Fund NFO

Axis Global Equity Alpha FOF is an open-ended fund of fund scheme investing in Schroder International Selection Fund Global Equity Alpha. Hence, this is a Fund of Fund where the money invested in India gets directly invested in the Schroder International Selection Fund Global Equity Alpha. Schroder Investment Management is based out of Luxembourg and is managing assets worth 525.8 billion pounds.

Some important details of NFO are as follows:

• The NFO is open from 4th September 2020 to 18th September 2020.
• The minimum Application is Rs. 5,000 and in multiples of 1 thereafter
• Exit load is nil for 10% of investment redeemed before 12 months. For remaining investment, it is 1% if redeemed before 12 months.
• Taxation of the fund is according to non-equity fund taxation. For more details refer to the Mutual Fund Taxation blog. 

Now let’s look at the details of the underlying fund portfolio.

Axis Global Equity Alpha Fund of Fund NFO – Portfolio Details

As we mentioned earlier the investment done in Axis Global Equity Alpha FOF will be routed to Schroder International Selection Fund Global Equity Alpha. Hence, it is important to look at the details of this fund and the underlying portfolio.  Here are some key points to note about Schroder International Selection Fund Global Equity Alpha :

• Fund Inception: July 2005
• Asset Under Management: USD 1.60 Billion
• Benchmark: MSCI World NR

Schroder International Selection Fund Global Equity Alpha invests in Equity stocks across the globe. Hence it is not limited to one country. The portfolio breakup as on 31st July 2020 is as follows:

As you can see, the exposure is higher to developed economies like North America, Europe, and the UK as compared to developing economies. Similarly, the top holdings in the fund are major US stocks viz. Amazon, Alphabet, Microsoft, Visa, Adobe, Facebook.

The Past performance comparison with respect to the benchmark is also a good indicator of the fund’s management. Here’s how it’s historic performance looks like:

In terms of performance, the underlying fund has managed to beat the benchmark in INR terms over the last 1 and 3 year period. Looking at these details, should you invest in this NFO?

Should you invest in Axis Global Equity Alpha Fund of Fund NFO

The first thing to note before we get into the suitability of the fund is that Axis Global Equity Alpha FOF NFO is not similar to other international equity funds. A lot of global funds investors are currently investing in are US Equity Funds. Whereas this fund is spread across the globe including the US. The past performance of these funds looks extraordinarily good but it does come with its own risks.

International equities are an important part of the portfolio from a diversification angle. However, when we are investing from India two factors are at play: Currency movement and stock movement. While Indian markets are fairly easy to track, global markets are much more complicated. Similar to any equities, global equities are also extremely volatile hence do not underestimate the risk on account of recent overperformance.

At the outset, the underlying fund in Axis Global Equity Alpha FOF NFO has a good track record and is a good option for global diversification. However, you should only invest if your risk profile allows you to. For a conservative investor, this fund can be too volatile. Hence, you can opt for this fund if you are willing to take high risk. Additionally, limit the portfolio exposure to 7-8% of the entire portfolio to reduce the downside.