Should you invest in New Fund Offers (NFO)?

By: ManMohan Singh Mahara

Facebook Page @ConchCapital

21 Sep 2020

Disclaimer: Investors are advised to carefully study the investment document of the fund
(SID) or consult their advisor.
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Should you invest in New Fund Offers (NFO)?

Some of the funds launched after COVID -Mkt Crash Category Region FOF
Axis Global Equity Alpha Fund of Fund Diversified Global FOF
ICICI Prudential ESG fund Diversified Upto 20% Overseas ESG
Motilal Oswal Multi-Asset Fund Diversified Upto 20% Overseas FOF
Motilal Oswal Nasdaq 100 (non-financial) Fund Of Fund Non-Financial USA FOF
Nippon India Multi Asset Fund Diversified Upto 20% Overseas

COVID triggered market crash resulted in sharper drop in investment value of

most equity funds than those invested in gold and debt funds. Further equity
funds invested in overseas markets saw faster recovery and better performance.

This has underlined the concept of having portfolio of funds that are invested
into diversified asset classes. It has also triggered the need for funds that allow
investors to invest in companies less affected by Covid, growing fast but are not
available in India for investing; e.g. Alphabet, Amazon, Microsoft, Facebook etc..

This sentiment has been tapped by a few fund houses of late by launching spate
of new funds (NFOs) with diversified asset classes and full or partial investment
into overseas markets. 2
Should you invest in New Fund Offers (NFO)? Cntd..

While the NFOs are marketed aggressively by asset managing companies (fund
houses), Investors need to carefully study the fund offerings and decide whether
they need to subscribe the NFO with lumpsum or SIP investments.

Majority of the NFOs launched are not really new funds, they are existing funds
managed by reputable fund houses (AMC) globally or specific geography in the
world. Fund house(s) in India collaborate with such overseas AMCs for providing
overseas avenues to resident and NRI investors in underlying fund(s) managed
overseas. Such launches are also termed as fund of fund (FOF).

Alternatively, other fund houses directly manage investments overseas.

Proportion of overseas investment, choice of geographies and chosen asset
class(es) depend on the category of fund as defined in Scheme Information
Document (SID) by the fund house with SEBI.

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Should you invest in New Fund Offers (NFO)? Cntd..

But investors need not rush to invest in these NFOs, there are a number of existing
funds that allow resident and NRI investors to participate into global opportunities.
# Fund Underlying overseas fund (fund of fund) Category Region
1 DSP US Flexible Equity Fund BlackRock Global Funds - US Flexible Equity Fund Diversified USA
2 EDELWEISS US TECHNOLOGY EQUITY FUND OF FUND JPMorgan Funds - US Technology Fund Technology USA
3 Edelweiss US Value Equity Off-Shore Fund JPMorgan Funds - US Value fund. Diversified USA
4 FRANKLIN INDIA FEEDER - FRANKLIN U.S. OPPORTUNITIES FUND Franklin U.S. Opportunities Fund Diversified USA
5 ICICI Prudential US Bluechip Equity Fund Diversified USA
6 Motilal Oswal Nasdaq 100 (non-financial) Fund Of Fund NASDAQ 100 ETF Non-Financial USA
7 Motilal Oswal S&P 500 Index Fund S&P 500 Index ETF Diversified USA
8 Nippon India US Equity Opportunities Fund Diversified USA
9 ICICI Prudential ESG fund Diversified Upto 20% Overseas
10 Motilal Oswal Multi-Asset Fund Diversified Upto 20% Overseas
11 Nippon India Multi Asset Fund Diversified Upto 20% Overseas
12 Aditya Birla Sun Life International Equity Fund - Plan B Diversified Up to 35% Overseas
13 Parag Parikh Long Term Equity Fund Diversified Up to 35% Overseas
14 Nippon India Japan Equity Fund Diversified JAPAN
15 Edelweiss Greater China Equity Off-Shore Fund JP Morgan Funds – Greater China Fund Diversified Greater China
16 Aditya Birla Sun Life Commodities Equity Fund - Global Agri Plan Agri/Commodity Global
17 Aditya Birla Sun Life International Equity Fund - Plan A Manufacturing Global
18 Axis Global Equity Alpha Fund of Fund Schroders-Global Equities Diversified Global
19 DSP Global Allocation Fund BlackRock Global Funds – Global Allocation Fund Diversified Global
20 DSP World Agriculture Fund BlackRock Global Funds –Nutrition Fund Agri/Nutrition Global
21 DSP World Energy Fund BlackRock Global Fund - World Energy Fund Energy Global
22 DSP World Gold Fund BlackRock Global Fund -DSP World Gold Fund Gold Global
23 DSP World Mining Fund BlackRock Global Fund - World Mining Fund Mining Global
24 ICICI Prudential Global Stable Equity Fund (FOF) Nordea 1 - Global Stable Equity Fund - Unhedged Diversified Global
25 Invesco India Feeder - Invesco Global Equity Inc Diversified Global
26 PGIM India GLOBAL EQUITY OPPORTUNITIES FUND PGIM Jennison Global Equity Opportunities Fund Diversified Global
27 Sundaram Global Brand Fund Diversified Global
28 Edelweiss Europe Dynamic Equity Off-Shore Fund JP Morgan Funds – Europe Dynamic Fund Diversified Europe
29 FRANKLIN INDIA FEEDER - FRANKLIN EUROPEAN GROWTH FUND Franklin European Growth Fund Diversified Europe
30 Invesco India Feeder - Invesco Pan European Equity Diversified Europe
31 PGIM India Euro Equity Fund UBI SICAV Euro Equity Diversified Europe
32 Edelweiss Emerging Markets Opportunities Equity Offshore Fund JP Morgan Funds – Emerging Mkts Oppr.Eqt. Offshore Fund Diversified Emerging Mkts
33 Kotak Global Emerging Market Fund Diversified Emerging Mkts
34 Franklin Asian Equity Fund Diversified ASIA
35 Edelweiss Asean Equity Off-Shore Fund JP Morgan Funds – ASEAN Equity Fund Diversified ASEAN

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Should you invest in New Fund Offers (NFO)?

In conclusion, investors are advised to carefully asses their investment

objectives and asset diversification needs.

Launches of new funds (NFOs) can provide investors new investment

opportunities not available so far and if invested can improve returns on their
invested capital. However, if your portfolio already comprises with funds
invested into suitably diversified assets and geographies, then it is better to give
a miss to the new funds (NFOs).

As an example, launch of ICICI Prudential ESG (Environment, Social, Governance)

fund NFO - one of the three funds in this category, other two are managed by
AXIS MF and SBI MF – is well designed flexible/multi asset fund with up to 20%
investment overseas, that is trying to address the need for sustainable long term
returns by investing in corporates that are well governed and that care for their
broader responsibilities towards healthy societies and environment.