ICICI Pru Global Stable Equity :: Business Line

Slice of world markets

The developed markets, especially the US, seem to be holding greater promise than emerging economies at this point in time. To cash in on this theme, ICICI Prudential AMC has launched a new fund offer, named the Global Stable Equity Fund.

This is a fund-of-funds. Thus, the new fund will invest in units/shares of an underlying fund, the Nordea 1 - Global Stable Equity Fund – Unhedged, managed by the Nordea Asset Management Company, based in Luxembourg.

FUND CHARACTERISTICS

Re-launched in its current form in January 2010, the underlying fund aims to invest in equities that have a potential to give stable returns over a span of several years. The fund has diversified holdings across countries, such as the US, Japan, the UK, France, Switzerland and Canada. But the US, with a weightage of about 55 per cent, remains the preferred investment destination, according to the fund’s July 2013 portfolio.

About half the fund‘s assets are currently invested in the Healthcare, IT and Consumer Staples sectors, with Microsoft, KDDI, Aflac, Novartis and Wal-Mart being the preferred stocks.

Benchmarked to the MCSI World Net Return Index, the fund has delivered returns of 12-13 per cent over the last one- and three-year periods, in Euro terms.

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SUITABILITY

The fund will help investors benefit from the diversification that international investing brings to their portfolio, as international markets don’t move in tandem with Indian markets.

For example, in the last one year, international equity funds, such as Birla Sun Life International Equity and DWS Global Thematic Offshore managed about 33 per cent returns, even as the best domestic diversified equity funds’ returns were in single digits.

Besides, currency movements also play a vital role in determining the returns.

During volatile times such as now, when the Indian rupee has depreciated against major international currencies, the rupee-return could be much higher. In addition, considering that this fund invests in several countries in various currencies, it also diversifies currency risks for the investor, unlike funds focused on a single country, such as the US.

But remember the fund seeks to offer investors the benefit of long-term return opportunities. Its ‘value’ approach to investing hence may not suit investors looking to ride on momentum or investors with a perspective of less than three-five years.

Another point that investors should keep in mind is the differential tax structure for fund-of-funds. For the purpose of taxation of capital gains on the sale of units, the treatment for fund-of-funds is similar to debt funds.

ISSUE DETAILS

The offer is open for subscription until September 10, 2013. The minimum application amount is Rs 5,000 and in multiples of Re 1, thereafter.