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IDFC Mutual Fund plans to launch US equity fund of funds

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IDFC Mutual Fund has announced plans to launch a fund of funds (FoF) investing in US stocks. The fund will feed into the JP Morgan US Growth Fund. The new fund offer (NFO) for the FoF will run from 29 July to 12 August and, being an open-ended fund, will be open for subscription thereafter as well. The expense ratio of the fund is capped at 2.25%, a spokesperson for IDFC Mutual Fund told Mint. There is an exit load of 1% for redemptions made within 1 year of purchase.

The JP Morgan US Growth Fund has a portfolio of 81 stocks and is benchmarked to the Russell 1000 Growth Index as of 31 May. It is primarily a large-cap oriented fund with some allocation to mid-cap stocks. The fund is slightly underweight for “hot” sectors such as technology and healthcare and overweight sectors like financials and industrials. Despite its relative underweighting, however, its top four holdings are tech stocks—Alphabet, Apple, Microsoft and Facebook. The slight value orientation overall,however, has resulted in it having a lower PE ratio (23.6 times) than its benchmark (26 times). The fund is overweight stocks such as agricultural equipment maker Deere, Snap (owner of the Snapchat app), brokerage Charles Schwab and financial services companies such as Morgan Stanley and the Blackstone Group. The JP Morgan US Growth Fund has delivered a CAGR of 26.6% in dollar terms over the past five years, as of 31 May beating its benchmark by 5%. In rupee terms, this translates to 28.5%.

From calendar year 2014 to 2020, it underperformed its benchmark only in 2016.

“US equities are a powerful complementary addition to any serious Indian investor’s portfolio, facilitating effective diversification with its low correlation to Indian equities. Additionally, the US economy is showing signs of strong economic revival supported by the aggressive vaccination roll-out and low hospitalization due to covid-19 cases. The record fiscal stimulus, restoration in investor and consumer confidence, steady reopening of establishments and pent-up consumer demand is expected to drive GDP growth for CY21 at 6-7%, the highest in almost 40 years. While diversification is always a good idea, we believe this is an especially opportune time for an Indian investor to consider a meaningful allocation of US equities in their portfolio through our fund,” said Vishal Kapoor, chief executive officer, IDFC AMC.

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