Mirae Asset Equity Allocator Fund of Fund: Focusing on Passively Managed ETFs

Sep 09, 2020

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Mirae Asset Mutual Fund has launched a domestic Fund of Fund, Mirae Asset Equity Allocator Fund of Fund that will invest in ETFs predominantly.

Mirae Asset Mutual fund believes that current volatile environment is difficult to do stock picking, but investing in some of the top ETFs (Nifty 50, Nifty Next 50), including Midcap ETFs, in a passive manner may help produce nominal alpha in the long run.

Accordingly, the fund house has launched Mirae Asset Equity Allocator Fund of Fund which will invest in domestic ETFs of large and midcap stocks.

Given that the underlying schemes in the fund's portfolio will track specific indices in the largecap and midcap segment, the risk return proposition of the scheme will be moderately high.

[Read: Find Out the Best Large & Midcap Funds to Invest in 2020]

Hence the scheme is suitable for aggressive investors who wish to invest in large and or midcap stocks at low cost for a long term investment horizon of at least 5 years.

Table 1: Details of Mirae Asset Equity Allocator Fund of Fund

Type An open ended fund of fund scheme predominantly investing in units of domestic equity ETFs Category Domestic FOF
Investment Objective To provide long-term capital appreciation from a portfolio investing predominantly in units of domestic equity ETFs. There is no assurance that the investment objective of the Scheme will be realized
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10 per unit
Plans
  • Regular
  • Direct*
Options
  • Growth
  • Dividend (Pay-out Option and Re-investment Option)
Entry Load Nil Exit Load Nil
Fund Manager Ms Bharti Sawant Benchmark Index NIFTY 200 Index (TRI)
Issue Opens: 08/09/2020 Issue Closes: 15/09/2020
(Source: Scheme Information Document)

How will the scheme allocate its assets?

Under normal circumstances, it is anticipated that the asset allocation of Mirae Asset Equity Allocator Fund of Fund (MAEAFoF) will be as follows:

Table 2: MAEAFoF's Asset Allocation

Instruments Indicative Allocation (% of Total Assets) Risk Profile
Minimum Maximum High/Medium/Low
Units of domestic Equity Exchange Traded Funds (ETFs) 95 100 High
Money market instruments / debt securities, Instruments and/or units of debt/liquid schemes of domestic Mutual Funds 0 5 Low to Medium
  • The Scheme shall not invest in securitised debt.

  • The Scheme shall not invest in Structured Obligations / Credit Enhancements.

  • The Scheme shall not invest in derivatives.

  • The scheme shall not participate in repo in corporate debt securities.

  • The Scheme shall not engage in securities lending or short selling

  • The Scheme shall not participate in Credit Default Swaps

  • The Scheme shall not invest in foreign securities

The Scheme can invest in the schemes managed by Mirae Asset Mutual Fund or any other Mutual Fund(s) as per the above stated asset allocation. The cumulative gross exposure through units of domestic Equity Exchange Traded Funds, Money market instruments / debt securities, Instruments and/or units of debt/liquid schemes of domestic Mutual Funds shall not exceed 100% of the net assets of the Scheme. However, cash or cash equivalents with residual maturity of less than 91 days shall be treated as not creating any exposure.
(Source: Scheme Information Document)

What is the Investment Strategy?

The investment objective of Mirae Asset Equity Allocator Fund of Fund is to predominantly invest in the units of domestic equity ETFs. The underlying portfolio of the fund shall mostly be inclined towards large cap and/or midcap equity segment.

The selection of stocks for the portfolio of underlying ETFs may be based on market cap range, sector, theme, strategy, etc., or a combination of one or more of these styles. Investments made from the net assets of the Scheme would be in accordance with the investment objective of the Scheme and the provisions of the SEBI (MF) Regulations. The AMC will strive to achieve the investment objective by way of a judicious portfolio mix comprising of Debt and Money Market Instruments and equity / equity related instruments.

Who will manage Mirae Asset Equity Allocator FoF?

Mirae Asset Equity Allocator Fund of Fund will be managed by Ms Bharti Sawant. She has done her MS Finance from ICFAI, is a CFA and Bachelors of Commerce graduate.

Ms. Sawant has professional experience of more than 12 years and her primary responsibility includes Investment Analysis & Fund Management. She has been associated with the AMC as an Investment Analyst since September 3, 2013. She was previously associated with Sushil Finance Securities Pvt. Ltd., Latin Manharlal Securities Pvt. Ltd., Kabu Shares & Stocking Pvt. Ltd. for Financial Analysis and Research.

Some of the other schemes that Ms Bharti Sawant manages at the fund house include Mirae Asset NIFTY 50 ETF and Mirae Asset NIFTY Next 50 ETF

Outlook for Mirae Asset Equity Allocator Fund of Fund

Mirae Asset Equity Allocator Fund of Fund employs a passive management strategy that aims to generate long term capital appreciation for investors by investing in units of domestic equity ETFs. This fund will invest in mix of large cap and mid cap index ETFs to earn a nominal alpha. As per the fund house, the investment framework will be done based on the valuation and attractiveness among the underlying indices of large cap and mid cap segments chosen by the fund manager.

Image : Investment Framework

(Source: Mirae Asset Equity Allocator Fund of Fund)

So, the performance of the scheme will depend on the performance of the underlying index and the rebalancing strategy followed by the fund management.  Currently Indian equity market is crusading through troubled waters due to adverse effects of COVID-19 pandemic.

[Read: 5 Valuable Money Management Lessons from the Coronavirus Pandemic]

Only a handful bellwether companies are showing stability when the domestic macroeconomic factors like the negative GDP growth of 23.9%; farmer distress; heightened unemployment levels; possibility of inflation ticking up again; vulnerable rupee; Indo-China border distress and rising fiscal slippages are in play. So the journey of wealth creation may not be easy.

[Read: Why You Cannot Ignore Reviewing Your Portfolio and Building an All-Weather Portfolio Now]

Whether to sign up for this fund or avoid will depend on your preference, suitability, and risk appetite as an investor. Mirae Asset Equity Asset Allocator Fund of Fund offers an opportunity to investors who would prefer enjoying the indirect benefit of large and mid-cap ETFs, either in lump sum or through the SIP mode instead of buying units of the ETFs directly from the exchange. You need to keep in mind your preferences before signing up for the fund.

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Warm Regards,
Aditi Murkute
Senior Writer

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