BNP Paribas Funds Aqua Fund of Fund: Seizes Growth by Investing in Global Water Infrastructure

Apr 24, 2021

Although we are still struggling with the second wave of COVID-19, one thing this pandemic has taught us is to be prepared for future and protect your existing resources. Water is a stable resource globally but only a minor portion exists as freshwater. The demand for water is increasing with rapid urbanization and growing population in various regions. Climate change is expected to exacerbate water shortages, as rising temperatures contribute to droughts in some regions and heavy rainfall resulting in flooding in others.

Many companies in emerging and developed countries are working to provide solutions by investing in smart technologies for water treatment, recycling and management that will respond to the water crisis issues and ensure reliable source of water.

Investing in companies that work to improve water resources or provide eco-solutions can provide a long-term potential for many investors to gain from these growing businesses. The concept of focus on environmental concerns is widespread globally and there are several international mutual fund schemes dedicated to various environmental issues.

However, Indian investors' access to such funds is limited, as only few fund houses have launched schemes with ESG framework, though the trend is slowly catching up. Investors are seeking to invest in funds that support sustainable investing approach to gain better risk-adjusted returns and provide positive environmental impact.

Looking at the increasing investor awareness about investing in mutual fund schemes aligned to support the environmental concerns. BNP Paribas Mutual Fund launched BNP Paribas Funds Aqua Fund of Fund, an open-ended Fund of Fund scheme investing in BNP Paribas Funds Aqua (Lux).

On the launch of this fund, Mr Sharad Sharma MD and CEO of BNP Paribas Asset Management India Pvt. Ltd. said, "Factors such as rising global population and urbanisation as well as an ageing water infrastructure are contributing to an ever-increasing gap between the global demand and supply of water. Water is fast becoming one of our most precious resources and the coming few decades are likely to see significant investment towards upgrading water infrastructure. This Fund presents Indian investors with an opportunity to invest in global water related businesses across the value chain that are working to address this crisis. It further strengthens our commitment to sustainable investing and to provide world class investment solutions for our stakeholders."

Table 1: Details of BNP Paribas Funds Aqua Fund of Fund

Type An Open Ended Fund of Fund scheme investing in BNP Paribas Funds Aqua (Lux) Category Fund of Fund - Overseas (FoF)
Investment Objective The primary investment objective of the Scheme is to seek capital appreciation by investing predominantly in units of BNP Paribas Funds Aqua (Lux). However, there can be no assurance that the investment objectives of the Scheme will be realized. The Scheme does not guarantee / indicate any returns.
Min. Investment Rs 5000/- and in multiples of Re 1 thereafter. Additional purchase Rs 1000/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
SIP/STP/SWP Available
Plans
  • Direct
  • Regular
Options
  • Growth
  • Income Distribution cum Capital Withdrawal (IDCW)*
Entry Load Not Applicable Exit Load
  • If units of the Scheme are redeemed or switched out within 12 months from the date of allotment - 1% of the applicable NAV;
  • If units of Scheme are redeemed or switched out after 12 months from the date of allotment - Nil
Fund Manager - Mr Abhijeet Dey
- Mr Karthikraj Lakshmanan
Benchmark Index MSCI World Index (Total Return Index)
Issue Opens: April 16, 2021 Issue Closes: April 30, 2021
(Source: Scheme Information Document)
 

What will be the Investment Strategy for BNP Paribas Funds Aqua Fund of Fund?

BNP Paribas Funds Aqua FoF aims to achieve its investment objective of seeking capital appreciation by primarily investing in units of BNP Paribas Funds Aqua (Lux).

The underlying scheme intends to achieve sustainable and above market returns in the long run by investing globally in companies that are active in the rapidly growing water value chain. The world's water resources are under considerable strain and there are rising concerns about water quality and the stability of water infrastructure around the globe.

Consequently, the underlying scheme focuses on investing in companies growing faster than broader market due to rise in demand for environmental products and services. Companies and sectors focusing on water recycling technologies, efficiency and water treatment process, maintenance and renovation of water conveyance network and utilities form part of the fund's holdings.

The portfolio of the underlying scheme provides a positive environmental impact, sustainable investing approach and it is diversified across the water value chain with exposure to both defensive and cyclical stocks.

The following is list of constituents and sectors the underlying scheme holds by their weightage as of March 31, 2021:


(Source: BNP Paribas Funds Aqua Fund of Fund PPT)
 

About the benchmark

The MSCI World Index is a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries. It covers 85% of the free-float market capitalization in each country.

This scheme apart from investing 95% of its assets in units of BNP Paribas Funds Aqua (Lux), can invest up to 5% of its assets in Money Market Instruments and/or units of Mutual Fund in order to meet the liquidity requirements from time to time.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation of BNP Paribas Funds Aqua Fund of Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Units of BNP Paribas Funds Aqua (Lux)* 95 100 High
Money Market Instruments and/or units of Mutual Fund 0 5 Low
(Source: Scheme Information Document)
 

Who will manage BNP Paribas Funds Aqua Fund of Fund?

Mr Abhijeet Dey and Mr Karthikraj Lakshmanan will be the dedicated fund managers for BNP Paribas Funds Aqua Fund of Fund.

Mr Abhijeet Dey is a Senior Fund Manager (Equity) at BNP Paribas Asset Management India Pvt. Ltd. and he has over 20 years of experience in financial services industry. Prior to this, Mr Dey was working at BNP Paribas Asset Management India Pvt. Ltd. as Equity Research Analyst and then as Fund Manager, he was also associated with Kotak Mahindra AMC and Pioneer Intermediaries Ltd as Equity Research Analyst, Frost & Sullivan Pvt. Ltd. as Research Analyst, Indiainfoline.com Ltd. as Equity Research Analyst at the beginning of his career.

His qualification includesMMS (Mumbai) and B.E. (Mech.). Currently other schemes under him are; BNP Paribas Large Cap Fund, BNP Paribas Focused 25 Equity Fund, BNP Paribas Midcap Fund, Equity Portion of BNP Paribas India Consumption Fund, BNP Paribas Multi Cap Fund and BNP Paribas Conservative Hybrid Fund.

Mr Karthikraj Lakshmanan is a Senior Fund Manager (Equity) at BNP Paribas Asset Management India Pvt. Ltd. and he has over 13 years of experience in financial services industry. Prior to this, he was working as Senior Portfolio Manager (Portfolio Management Services) and Research Analyst Equities (PMS) at BNP Paribas Asset Management India Pvt. Ltd., ICICI Prudential Asset Management Company Limited as Senior Research Analyst, Goldman Sachs Services Pvt. Ltd. as Business Analyst.

Mr Lakshmanan's qualification includes, B.Com, PGDBM (from SPJIMR, Mumbai), CA and has Cleared CFA Level 3 (US CFAI). Currently other schemes managed by him are; BNP Paribas Large Cap Fund, BNP Paribas Focused 25 Equity Fund, BNP Paribas Midcap Fund, Equity Portion of BNP Paribas India Consumption Fund, BNP Paribas Multi Cap Fund, BNP Paribas Conservative Hybrid Fund, BNP Paribas Arbitrage Fund, BNP Paribas Substantial Equity Hybrid Fund, BNP Paribas Long Term Equity Fund, BNP Paribas Dynamic Equity Fund.

Fund Outlook - BNP Paribas Funds Aqua Fund of Fund

Investments in global water infrastructure universe via these mutual funds schemes offers diversification across geographic regions and markets. Such companies with an approach towards growing water value chain are on the rise in emerging and developed countries, this gives Indian investors an opportunity to invest across regions and capitalizations with adequate exposure to growing global mid cap equities along with well-established large-cap equities.

This scheme invests in the underlying fund that intends to identify global companies that are growing faster than the broader market and with a slightly higher mid-cap bias. It provides exposure to defensive as well as cyclical stocks and the fund house has been incorporating various sustainable investing practices with a deeply embedded ESG framework.

Being a fund of fund, BNP Paribas Funds Aqua FoF will be passively investing and the performance of this fund will depend on the investments made in the underlying scheme. However, do note that the underlying scheme's portfolio is diversified across countries and sectors, which could be prone to currency risk, geopolitical risk, regulation risk etc.

This scheme is suitable for investors seeking sustainable investment approach, have a high-risk profile to bear the market volatility, a longer investment horizon and investment objective that aligns with the fund's objective.

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Warm Regards,
Mitali Dhoke
Jr. Research Analyst

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