Mirae Asset India-China Consumption Fund
Mirae Asset India-China Consumption Fund is an offshore thematic fund showing its confidence in the consumption-led growth in India and China.
Summary
| Type |
Open-ended equity scheme |
Benchmark Index |
MSCI India Consumption Index (65%) + MSCI China Consumption
Index (35%) (with quarterly rebalancing) (Price in INR) |
| Min. Investment |
Rs 5,000 |
Face Value |
Rs 10 per unit |
| Entry Load |
Nil |
Exit Load * |
Upto 1 year: 1.00%
After 1 year: Nil |
| Issue Opens |
March 9, 2011 |
Issue Closes |
March 23, 2011 |
Investment Objective*
The investment objective of the scheme is “to generate long term capital appreciation through an actively managed portfolio investing in equity and equity related securities of companies that are likely to benefit either directly or indirectly from consumption led demand in India/China. The Scheme does not guarantee or assure any returns.”
*Source: Scheme Information Document
Is this fund for you?
The Mirae Asset India-China Consumption Fund (MAI-CCF) being a thematic offshore fund is positioned to take advantage of the consumption story in India and China.
As far as India is concerned we all know that it is a consumption-led economy due to its peculiar demographics (population in the working age group being the maximum at 64.3% approx.).
Also according to the demographics, India’s working-age population will see a growth of 17.4% during the period of 2010-2020. This in a way reveals that India’s growth story will continue to remain consumption driven.
China on the other hand has a history of slow pace of consumption due to its investment-led growth model. However, China’s rising urban middle class and its consequent impact on consumption will gradually re-balance its economy towards consumption driven.
From the above facts it seems the MAI-CCF is well placed to take advantage of the growing consumption led growth in both the countries (India and China), but nevertheless its fortunes will tied to a few select industries that fall under the gamut of consumption.
Hence, we advise the investors’ to carefully assess their risk appetite before investing in thematic offshore fund like MAICCF.
Portfolio & Investment Strategy
Launched with an objective to generate long term capital appreciation through an actively managed portfolio of equity and equity related securities of companies that are likely to benefit either directly or indirectly from consumption led demand in India/China, the fund is likely take exposure to sectors such as Consumer Discretionary, Consumer Staples, Autos, Realty, Healthcare, Education, Media & Entertainment, Banks & Financial Services, Telecom, Transportation, Food and Tourism & Hospitality, etc., while maintaining its asset allocation as under:
| Instruments |
Allocation Range
(% to Total Assets) |
Risk Profile
High/Medium/Low |
| Minimum |
Maximum |
| Indian Equities and Equity Related Securities of companies that are likely to benefit either directly or indirectly from consumption led demand. |
65 |
90 |
High |
| Chinese Equities and Equity Related Securities of companies that are likely to benefit either directly or indirectly from consumption led demand |
10 |
35 |
High |
| Money market instruments (including CBLO) / debt securities Instruments and/or units of debt/liquid schemes of domestic Mutual Funds. |
0 |
25 |
Low to Medium |
(Source: Scheme Information Document)
Interestingly the fund may not have any bias towards particular market cap or style in selecting investment opportunities. The fund manager will first analyse the macro economic, political, regulatory, industry trends and business cycles that tend to affect the consumption pattern, thus following a top down approach.
After this, the fund manager will invest in companies (following a bottom-up analysis) taking into consideration:
- Financial strength
- Competitive position
- Profitability
- Growth prospects
- Management quality
The fund manager will also continuously monitor the investment decisions and its impact on the performance of the scheme in order to make suitable adjustments at periodic intervals.
Outlook on consumption pattern in India:
India’s consumer spending is set to increase by leaps and bounds due to rising household incomes coupled with the growing working age population. As brought out in the Budget 2011-12 by the Finance Minister – Mr. Pranab Mukherjee, over 70% of India’s population will be in the working age group by 2025.
However, this rapid increase in India’s population acts as a double-edged sword. On one hand it will give India a much needed working population (to sustain high levels of growth); but on the other hand it will pose severe challenges on India’s infrastructure and struggling health and education system.
Thus, the key lies here in imparting education to the young population and developing the infrastructure sector many folds.
Outlook on consumption pattern in China:
The growing number of working population, rising urbanisation and higher income levels will boost the consumption-led demand going forward, making China the third largest consumer market in the world.
An interesting point to be noted here is that people will spend a larger proportion of their income on discretionary items (unlike food and clothing earlier) thus significantly changing the pattern of spending in the economy.
All these above factors are expected to raise China’s consumption share of GDP in the near future. Thus overall China’s consumption-led growth story looks quite promising based on the demographic characteristics.
Fund Manager Profile
The fund’s investments in India would be managed by the following fund managers:
- Mr. Gopal Agrawal – He is the Deputy Chief Investment Officer (CIO) at Mirae Asset Global Investments (India) Private Limited, and holds a degree in Chemical Engineering as well as a MBM. Prior to his association with Mirae, Mr. Agrawal was the Fund Manager with SBI Mutual Fund. Prior to that, he has been associated with organizations such as Kotak Securities, HDFC Securities, IDBI Capital, UTI Securities and IPCL.
Along with MAI-CCF, Mr. Agrawal also co-manages Mirae Asset India Opportunities Fund, Mirae Asset Global Commodity Stocks Fund, Mirae Asset China Advantage Fund & Mirae Asset Emerging Bluechip Fund.
- Mr. Neelesh Surana – He is a Senior Fund Manager (Equity) at Mirae Asset Global Investments (India) Private Limited, and holds a degree in Mechanical Engineering as well as an MBA in Finance. Prior to this he was associated with ASK Investment Managers Pvt Ltd where he was responsible for tracking sectors like Metals, FMCG and Pharma.
Other schemes that are co-managed by Mr. Surana are Mirae Asset India Opportunities Fund, Mirae Asset Global Commodity Stocks Fund, Mirae Asset China Advantage Fund & Mirae Asset Emerging Bluechip Fund.
As regards the overseas investments are concerned, they would be managed by Mr. Basavraj Shetty who is the Fund Manager (Overseas Investments) at Mirae Asset Global Investments (India) Private Limited. Mr. Shetty also manages Mirae Asset Global Commodity Stocks Fund.
Prior to joining Mirae Asset Management, he was associated J P Morgan India Pvt. Ltd (as an Investment Banking – Associate) and Fist Global Stock Broking Pvt. Ltd. (as an equity analyst).
Fund Outlook
Primarily MAI-CCF’s equity portfolio would constitute to be stocks of companies directly or indirectly impacted by the consumption theory in India and China.
These companies would include Consumer Discretionary, Consumer Staples, Autos, Realty, Healthcare, Education, Media & Entertainment, Banks & Financial Services, Telecom, Transportation, Food and Tourism & Hospitality, etc.
Moreover, while the strategy of reaping the benefits in the consumption-led growth in both India and China sounds to be a prudent one from the demographics of both the countries, its fortunes will be closely knit with the sectors under the consumption theme.
Also, since MAI-CCF is an offshore fund, investors would have to bear additional risks, viz., exchange rate risk and country risk (political instability) associated with China.
To know whether to invest in this NFO please subscribe here. If you are already a subscriber then please login here
Add Comments