FT India Feeder - Franklin U.S. Opportunities Fund

FT India Feeder – Franklin U.S. Opportunities Fund is an offshore feeder fund showing its conviction in the ailing U.S. economy.

Summary

Type	Open-ended equity scheme	Benchmark Index	Russell 3000 Growth Index
Min. Investment:	Rs 5,000	Face Value	Rs 10 per unit
Entry Load	Nil	Exit Load *	Upto 1 year: 2.00% After 1 year: Nil
Issue Opens	January 17, 2012	Issue Closes	January 31, 2012

Investment Objective*

The investment objective of the scheme is “to provide capital appreciation by investing predominantly in units of Franklin U. S. Opportunities Fund, an overseas Franklin Templeton mutual fund, which primarily invests in securities in the United States of America.”

 

*Source: Scheme Information Document

 

Is this fund for you?

The FT India Feeder – Franklin U.S. Opportunities Fund (FTIF-FUSOF) being an overseas fund of funds scheme is positioned to take advantage of the investments in fast growing, innovative and exceptional growth potential companies situated in the United States of America.

Primarily FTIF-FUSOF is a feeder fund which will invest in overseas mutual fund units / trusts, mainly in units of Franklin U.S. Opportunities Fund (FUSOF) known as the parent fund. FUSOF invests principally in equity securities of US companies believed to possess sustainable growth characteristics and which meet growth, quality and valuation criteria. These include small, medium, and large capitalisation companies with strong growth potential across a wide range of sectors that have exceptional growth potential and fast growing, innovative companies within these sectors. The fund follows a bottom-up approach and growth style of investing.

 

Market Capitalisation (USD)	(% of Equity) As at 30/11/2011
< 1.5 billion	5.00%
1.5 billion - 5 billion	19.80%
> 5 billion	74.30%
Unavailable	0.80%

(Source: Franklin Templeton Investments)

 

Thus, FUSOF provides the following benefits to its investors:

 

• Capital appreciation
• Growth investment in sectors showing above average growth or growth potential as compared with the overall economy
• Investment concentrated in equities of U.S. issuers






 

Portfolio & Investment Strategy

FTIF-FUSOF is launched with an objective to generate long term capital appreciation by investing in the overseas mutual fund / unit trusts within the investment pattern allowing the Indian investor to diversify his / her risk from a single country and single currency investment. This thus makes FTIF-FUSOF a passively managed fund investing in units of the parent fund. The asset allocation pattern mandated on the fund under normal market conditions is as under:

 

Instruments	Allocation Range (% to Total Assets)		Risk Profile
	Minimum	Maximum	High/Medium/Low
Units / securities of overseas mutual funds / unit trusts.	80	100	Medium to High
Debt securities and Money market instruments	0	20	Low to Medium

(Source: Scheme Information Document)

 

Cumulative Performance (% CAGR)	1 year	3 years	5 years	10 years	Since Launch	Launch Date
Franklin U.S. Opp. Fund - A(acc)USD (%)	3.36	72.83	17.33	56.03	-26.20	4-Mar-00
Russell 3000 Growth Index (%)	8.32	68.62	13.62	31.73	-22.12	-

(Source: Franklin Templeton Investments)

 

The performance table reveals that FUSOF has been consistent enough over the 3 years, 5 years and 10 years in outperforming its benchmark index Russell 3000 Growth Index. However, from the past one year it has underperformed its benchmark. Even though the performance of the fund seems quite decent, an investor (in India) should be aware of risks involved in investing in FTIF-FUSOF:

 

• Currency risk: As the underlying scheme will invest in securities which are denominated in foreign currencies (here US Dollars), fluctuations in the exchange rates of these foreign currencies may have an impact on the income and value of the scheme.
   
• Country risk: Since the fund is an overseas feeder fund investing mainly in the United States of America, FTIF-FUSOF’s performance will closely knit to the economic, political and social risks arising in the U.S.






 

Fund Manager Profile

The fund’s investments in India would be managed by:

Ms Roshi Jain – She is the Vice President (based in Chennai) at Franklin Templeton Asset Management (India) Pvt. Ltd. Ms. Jain has earned her Post Graduate Diploma in Management from Indian Institute of Management, Ahmedabad in 2003. She also has to her credit Chartered Accountancy degree from Institute of Chartered Accountants from India in 1998 as well as a CFA. Prior to joining Franklin Templeton, she has worked as a Financial Analyst at Goldman Sachs, London.

Apart from managing FTIF-FUSOF, Ms Jain is the co-portfolio manager for Franklin Build India Fund and Franklin Asia Equity Fund. She is also responsible to provide research support on engineering sectors.

 

Fund Outlook

FTIF-FUSOF being a feeder fund, its performance will be closely linked to the performance of the parent fund FUSOF. Though FUSOF has performed well over the past 3 years when compared to its benchmark Russell 3000 Growth Index, its performance going forward will depend on the economic, social and political developments taking place in the U.S. The unemployment rate in the U.S. for the month of December 2011 came in at 8.5% as against 8.6% in the month of November 2011, still remains a concern. The GDP for the third quarter of 2011 did improve from 1.8% from 1.3% over the previous quarter. However, the debt to GDP ratio which is currently at 93.2% is another major cause of concern as this may lead to default on its debt obligation which in turn may cause widespread pessimism across the global markets.

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Comments
villadelia@villadelia.es Feb 25, 2012 it electrolyte, Dividend option is for people who require money from their investments from time to time. But, Dividend-re-investment defeats this purpose, so why not go for Growth option itself! Please share your comment on this logic.
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