ICICI Prudential Global Stable Equity Fund is an open-ended fund of funds scheme seeking to provide adequate returns by investing in the units of one or more overseas mutual fund schemes.

Summary

Type	An Open-ended Fund of Funds scheme	Benchmark Index	MSCI World - Net Return Index
Min. Investment: Additional purchase:	For lump sum -> Rs 5,000 and in multiples of Re 1 thereafter For Systematic Investment Plan (SIP) -> Monthly Option: Rs 1,000 or in multiples of Re 1 thereof. Quarterly Option: Rs 5,000 and minimum 4 installments Rs 1,000 and in multiples of Re 1 thereafter	Exit Load:	3.0% if the amount sought to be redeemed or switched out is invested for a period of upto 3 months from the date of allotment 1.0% if the amount sought to be redeemed or switched out is invested for a period from 3 months upto 18 months from the date of allotment Nil if the amount sought to be redeemed or switched out is invested for a period of more than 18 months from the date of allotment
Entry Load	Nil	Face Value	Rs 10 per unit
Issue Opens	August 27, 2013	Issue Closes:	September 10, 2013

 

Investment Objective*

ICICI Prudential Global Stable Equity Fund (the Scheme) is an open-ended fund of funds scheme that seeks to provide adequate returns by investing in the units of one or more overseas mutual fund schemes, which have the mandate to invest globally. Currently the Scheme intends to invest in the units/shares of Nordea 1 - Global Stable Equity Fund - Unhedged (N1-GSE-U). The fund manager may also invest in one or more other overseas mutual fund schemes, with similar investment policy/fundamental attributes and risk profile and is in accordance with the investment strategy of the Scheme.

The Scheme may also invest a certain portion of its corpus in domestic money market securities and/or money market/liquid schemes of domestic mutual funds including that of ICICI Prudential Mutual Fund, in order to meet liquidity requirements from time to time.

However, there can be no assurance that the investment objective of the Scheme will be realized.

 

*Source: Scheme Information Document

 

Is this fund for you?

ICICI Prudential Global Stable Equity Fund (IPGSEF) is an open-ended fund of funds scheme from the stable of ICICI Prudential Mutual Fund. IPGSEF is third overseas fund of funds scheme after ICICI Prudential US Bluechip Equity Fund and ICICI Prudential Indo Asia Equity Fund. IPGSEF is offered in partnership with Nordea Asset Management Company; which is one of the largest asset managers in Europe and is a part of the European banking group, Nordea.

It is noteworthy that ICICI Prudential Asset Management Company and Nordea Asset Management have entered into a partnership; and as per the pact, ICICI Prudential will provide all India-related investing needs of Nordea's clients. And Nordea will act as the global partner for areas of global investing for ICICI Prudential's Indian clients.

So the launch of IPGSEF is a step in the direction to enable Indian investors to invest in global equities. Being an overseas fund of funds schemes, IPGSEF is mandated to invest in units of one or more overseas mutual fund schemes which have a mandate to invest globally. As mentioned in the Scheme Information Document (SID), at present, IPGSEF intends to invest a dominant portion of its assets in the units / shares of Nordea 1 - Global Stable Equity Fund - Unhedged (N1-GSEF-U) (which is the main underlying fund) and / or other overseas mutual fund schemes, and the rest in cash and domestic money market instruments.

You see, the investment objective of N1-GSEF-U is "to preserve the Shareholder's capital and to provide an adequate rate of return on the investment. The investment manager will focus, on equities providing a potential of stable return over a time span of several years."; thus IPGSEF vide its investment in N1- GSEF-U endeavours to provide capital appreciation over the long-term. But in this endeavour, N1- GSEF- U and therefore even IPGSEF would be exposed to the following risks:
 

• Company specific changes
• Change in interest rate scenario
• Macroeconomic factors such as unemployment, public expenditure and indebtedness, inflation
• Regulatory / legal environment;
• Change in market conditions, countries, industries and sectors
   

However, N1- GSEF-U would hold a diversified equity portfolio.

So while IPGSEF offers geographical diversification to your investments; it would be suitable only for those who are willing to bear the aforementioned risks while investing overseas. Hence one should first ascertain his / her risk appetite and risk tolerance and then consider investing in IPGSEF.

 

Portfolio & Investment Strategy

A dominant portion of IPGSEF assets will be invest in in the units / shares of N1-GSEF-U and / or other overseas mutual fund schemes, and the rest in cash and domestic money market instruments.

Under normal circumstances the asset allocation pattern mandated on the fund is as under:

 

Instruments	Indicative Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Units/shares of Nordea 1 - Global Stable Equity Fund - Unhedged and/or other overseas mutual fund schemes*	95	100	Medium to High
Cash, domestic money market securities and/or money market/liquid schemes of domestic mutual funds including that of ICICI Prudential Mutual Fund	0	5	Low to Medium

*Other overseas mutual fund schemes would have similar investment policy/fundamental attributes and risk profile as N1-GSEF-U and is in accordance with the investment strategy of the Scheme.
(Source: Scheme Information Document)  

So while IPGSEF provides an opportunity to the investor to broaden the investment horizon to include foreign equity assets, it would be passively managed being structured as a fund of funds scheme.

It is noteworthy that N1-GSEF-U shall invest a minimum 2/3rd of its total assets in equities, other equity shares such as co-operative shares and participation certificates (equities and equity rights), dividend-right certificates, warrants on equities and equity rights. The balance (i.e. 1/3rd of its total assets) it may invest in bonds and other debt instruments denominated in various currencies and warrants on bonds. Moreover, N1-GSEF-U may also use financial derivative instruments as a replacement of direct investments in securities or to protect against downside risk.
 

As on June 30, 2013 N1-GSEF-U has held its assets as under:

 

Type of Security	% of assets
Equity	99.47
Net Liquid Assets	0.53

(Source: Scheme Information Document)  

And the country-wise exposure of investments made by N1-GSEF-U in Equity as at June 30, 2013 is as under:

 

Country	% of investment
United States	55.06
Japan	9.66
United Kingdom	8.50
France	5.93
Switzerland	4.41
Canada	4.25
Spain	3.20
Israel	2.12
Others	6.33

(Source: Scheme Information Document)  

The industry / sector exposure of N1-GSEF-U as on the aforesaid date is as follows:

 

Industry / Sector	% of investment
Healthcare	26.19
Consumer Staples	13.25
Information Technology	12.71
Telecommunication Services	9.23
Energy	8.10
Financials	7.77
Consumer Discretionary	7.70
Utilities	7.60
Others	6.90

(Source: Scheme Information Document)  

It is noteworthy that since N1-GSEF-U does not have any official reference index, for comparison purpose, MSCI World Index Net Total Return index is referred.

The "other overseas mutual fund schemes" identified where IPGSEF may also invest are:

 

• Nordea 1 - Senior Generations Equity Fund (N1-SGEF)
• Nordea 1 - Global Value Fund (N1-GVF)
   

Thus IPGSEF provides geographical diversification with foreign investments, which helps in reducing overall risk of an investment portfolio. But the scheme also carries with it the risk as enunciated above.

 

Fund Manager Profile

IPGSEF will be managed by duo, Mr Atul Patel and Mr Avinash Jain. Mr Atul Patel has over 3 years of experience and has to credit a degree in commerce (B.Com), cost accountancy (Grad. CWA) from the Institute of Cost Accountants of India and is a Chartered Accountant (CA) from the Institute of Chartered Accountants of India (ICAI). Apart for being responsible for managing IPGSEF, Mr Patel also manages the other offshore funds viz. ICICI Prudential U.S. Bluechip Equity Fund - U.S. portion and ICICI Prudential Indo Asia Equity Fund - Asia portion.

Mr Avinash Jain has a vast experience of 14 years in the financial markets and has to his credit a bachelor's degree in technology (B.Tech), PGDM from IIM (Kolkata) and a CFA charter. Apart for being responsible to manage the debt portion of IPGSEF, Mr Jain also manages ICICI Prudential Balanced Fund - Debt Portion, ICICI Prudential Child Care Plan - Gift Plan - Debt portion, ICICI Prudential Child Care Plan-Study Plan - Debt portion, ICICI Prudential MIP 25 - Debt portion, ICICI Prudential Monthly Income Plan - Debt portion, ICICI Prudential Income Opportunities Fund, ICICI Prudential Income Plan, ICICI Prudential MIP 5, ICICI Prudential Corporate Bond Fund, ICICI Prudential Plan Fixed Maturity Plan (for maturity more than 2 years) and ICICI Prudential US Bluechip Equity Fund - India debt portion.

 

Fund Outlook

IPGSEF being a fund of fund scheme, the fortune of the scheme would be determined by the performance of the underlying fund - N1-GSEF-U. It is noteworthy that N1-GSEF-U at present is investing a dominant portion of its assets in the U.S. economy, which at present is depicting signs of economic vigour aided by the Quantitative Easing 3 (QE3) stimulus programme. But if the U.S. Federal Reserve gradually winds-down the bond buying programme, the impact of the same on the U.S. economy and the underlying portfolio of N1-GSEF-U may be seen. In our view such a tapering may have a detrimental impact, which in turn would reflect in the performance of N1-GSEF-U. While the underlying fund also invests in some of the Euro zone economies and there have been reports of recession being over for the Euro zone (due to expansion in economic growth reported in the last quarter); the fact remains that situation of debt-overhang yet persists for the Euro zone, which again is a risk for the underlying fund, albeit some Euro zone countries held by the underlying funds are the relatively stronger ones. Thus the risks as cited earlier for N1-GSEF-U and therefore even IPGSEF remain, which will guide the performance.

 

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