Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund: Should You Invest?
Mitali Dhoke
Aug 27, 2022
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Innovation across centuries has redefined businesses across sectors. Artificial Intelligence is one of the key forces behind the fourth Industrial revolution. Artificial Intelligence is supporting several megatrends like Industrial Automation, Health Care, Digital Economy, Future Mobility etc.
Products and services including chatbots, smart assistants, face recognition, augmented and virtual reality, self-driving cars, etc. are being developed or altered using artificial intelligence. Global Corporate Investment in AI has almost doubled in the last two years. The next decade could see widespread use of artificial intelligence (AI) technology, which could significantly increase economic production across a range of industries.
The future of many enterprises will be shaped by technology and its wise application, which is not surprising. And this 'smartness' has taken the form of Artificial Intelligence (AI) over the past several years and its application spans several industries. Considering the positive outlook for the Artificial intelligence and technology industry, in the long run, investors can profit from the developments in AI technology by investing in mutual funds focused on AIQ theme.
Mirae Asset Mutual Fund has launched Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund. It is an open-ended fund of fund scheme investing in units of Global X Artificial Intelligence & Technology ETF.
On the launch of this fund, Mr Swarup Mohanty, CEO at Mirae Asset Investment Managers (India) Private Limited said, "Mirae Asset has been at the forefront of introducing global investment products for Indian investors. We are at a nascent stage of the evolution of the Artificial Intelligence & Technology theme in India, but globally this theme is taking centre stage, we believe introducing this fund to investors would offer them a chance to participate in the global theme. We want to bring the experience of investing in unique global offerings to Indian investors at an opportune time to make their investment horizon broad-based and relevant in the investment cycle of investors at large."
Table 1: Details for Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund
| Type |
An open-ended fund of fund scheme investing in units of Global X Artificial Intelligence & Technology ETF. |
Category |
Fund of Fund (Overseas) |
| Investment Objective |
The investment objective of the scheme is to provide long-term capital appreciation from a portfolio investing in units of Global X Artificial Intelligence & Technology ETF. There is no assurance that the investment objective of the Scheme will be realized and the Scheme does not assure or guarantee any returns. |
| SIP/STP/SWP |
Available |
| Min. Investment |
Rs 5,000/- and in multiples of Re 1/- thereafter. Additional Purchase Rs 1,000/- and in multiples of Re 1/- thereafter. |
Face Value |
Rs 10/- per unit |
| Plans |
|
Options |
|
| Entry Load |
Not Applicable |
Exit Load |
- If redeemed within 1 year (365 days) from the date of allotment: 1%
- If redeemed after 1 year (365 days) from the date of allotment: NIL.
|
| Fund Manager |
Mr Siddharth Srivastava |
Benchmark Index |
Indxx Artificial Intelligence & Big Data Index (TRI) (INR) |
| Issue Opens: |
August 16, 2022 |
Issue Closes: |
August 30, 2022 |
(Source: Scheme Information Document)
The investment strategy for Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund will be as follows:
Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund uses a passive approach to try to achieve the Fund's investment objective. The scheme will use a replication strategy whereby it will replicate the performance of underlying ETFs by investing in them subject to foreign exchange, cost and other associated charges.
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The underlying Global X Artificial Intelligence & Technology ETF mirrors the Indxx Artificial Intelligence & Big Data Index and invests in units in a similar proportion to generate parallel returns, subject to tracking errors. The scheme invests in companies that incorporate AI technology in their products & services, as well as companies that produce hardware used in AI for the analysis of Big Data.
Here's the list of top 10 holdings in the portfolio of Global X Artificial Intelligence & Technology ETF as on July 29, 2022:
(Source: Mirae Asset Global X Artificial Intelligence & Technology ETF FoF PPT)
The scheme may invest in the units of Global X Artificial Intelligence & Technology ETF through the exchange on which the ETF is listed, through the asset management company which is managing the ETF, through an authorized participant, market marker or any other available counterparty.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for Mirae Asset Global X Artificial Intelligence & Technology ETF FoF
| Instruments |
Indicative Allocations (% of Net Assets) |
Risk Profile |
| Minimum |
Maximum |
High/Medium/Low |
| Units of Global X Artificial Intelligence & Technology ETF |
95 |
100 |
High |
| Money market instruments including Tri-Party REPO/ debt securities |
0 |
5 |
Low to Medium |
(Source: Scheme Information Document)
About the benchmark
The Indxx Artificial Intelligence & Big Data Index is designed to track the performance of companies that are positioned to benefit from the development and utilization of Artificial Intelligence ("AI") technology in their products and services, as well as companies that produce hardware used in Artificial Intelligence applied for the analysis of Big Data.
The index intends to reflect the performance of 60 companies which are AI developers & service providers, AI-as-a-service("AIaaS"), and 25 companies which create hardware for AI and quantum computing. Portfolio diversification is ensured by keeping a stock cap of 3% and the portfolio is rebalanced on a semi-annual basis.
Who will manage Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund?
The designated fund manager for this scheme will be Mr Siddharth Srivastava. He holds an MBA (Tech) and BTech degree and has an overall experience of 11 years in the field of financial services and stock markets. Prior to joining Mirae AMC, he was Senior Manager at NSE Indices Limited and was associated as Senior Associate at Morgan Stanley Capital International.
At Mirae Asset Mutual Fund, Mr Srivastava currently manages, Mirae Asset NYSE Fang+ ETF, Mirae Asset S&P 500 Top 50 ETF and Mirae Asset Hang Seng TECH ETF.
Fund Outlook - Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund
Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund will invest in Global X Artificial Intelligence & Technology ETF (Listed in the US) which seeks to invest in companies that potentially stand to benefit from the further development and utilization of Artificial Intelligence (AI) technology. It tracks Indxx Artificial Intelligence & Big Data Index (TRI) (INR)
The scheme endeavours to provide exposure to the entire ecosystem of companies which are at the forefront of the Artificial intelligence mega-trend. It offers exposure to global big tech companies involved in the development and utilization of Artificial Intelligence (AI) in their products and services and development through AI hardware and AI services. With a portfolio of 83 companies spread across 20 industries, the underlying index provides global diversification diversified. The top 3 geographical exposure are the United States (67.9%), China (9.5%) and South Korea (4.3%).
The Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund offers a better opportunity to take exposure to global big tech at lower valuations currently. Being an overseas Fund of Fund scheme, it has a low correlation to the Indian equity market and invests in unique global themes. Since the scheme follows a passive approach, it is available at lower costs and reduces the risk of active stock selection risk.
However, do note that the scheme will invest a majority of its assets passively in international equities, which are risky in nature. The scheme will also be prone to geopolitical risk, and currency risk, and may face higher volatility due to dynamic global market conditions. It is a thematic Fund of Fund scheme, that will focus on investing in companies only under the Artificial intelligence & technology segment, which creates concentration risk. The fortune of this scheme will depend on the performance of the underlying ETFs.
Additionally, the persistent repercussions of the Russia-Ukraine conflict, the rise in global interest rates, and spiralling inflation around the globe may pose a significant risk to economic growth. These factors, among many others, could have a bearing on the underlying ETF's performance and may affect the scheme's portfolio negatively if the Artificial intelligence & technology sector moves out of favour.
Therefore, this scheme is a high-risk high-return investment proposition and suitable for investors possessing a decent understanding of the digital revolution space and having an investment horizon of at least 5-7 years.
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Warm Regards,
Mitali Dhoke
Research Analyst