The Axis global equity Alpha Fund of Fund(FoF) was opened for subscription, the global equity feeder fund of Axis AMC. The scheme is based on an Axis AMC link and has assets under the control of about USD 700 billion from Schroders, a UK-based multinational asset manager.
The global equity feeder funds are Indians who invest the whole corpus into another fund situated outside India. The Axis Global Equity Alpha FoF will add Global Equity Alpha to the Schroder International Selection Fund.
This year, foreign funds in India have gained great interest. According to data from the Association of Mutual Fund in India (Amfi), a total of about Rs.400 crore was invested in International Feeder Funds in July. India makes up only 3% in nominal terms of the world’s GDP, which means that the remaining 97% of the world’s investment in India alone is missing.
Foreign investment provides access and reduces the risk of the country-specific factors pulling India’s stock market to large global firms, such as Alphabet, Microsoft, and Apple.
Axis Global Equity Alpha FoF has a global focus instead of a single country. That’s different from most foreign feeds in India, which are now richly priced in the US market. Its market cap-to-GDP ratio is nearly 190% much higher than other stock markets, including 98% in India.
“Comparing a single country feeder to a diversified world fund is a bit like selecting a diversified domestic fund in comparison with a business fund. Ashwin Patni, head of goods and alternatives, Axis AMC said diversification dramatically reduces the risks.
Currency diversification is also beneficial to foreign investment. A presentation from Axis shows that from March 2005 to March 2020, the rupee has decreased annually by about 3.8% over the US dollar. But, with very little depreciation in certain cases, such as between March 2005 and March 2010, when it decreased 0.5% a year, this percentage fluctuates each year.
In the past five years and 10.5% since its inception in 2005, the founding Schroders fund has achieved a compounded annual growth rate (CPR) of 11.2 percent in rupee terms. The MSCI World Index delivered this almost equally over the two periods.
It is not subject to foreign currency limitations for investors to invest in it. In compliance with the Securities and Exchange Board of India rules, the fund’s cost ratio, including the underlying scheme, is limited to 2.25%, as is the case with domestic equity funds.
Interestingly, however, in 2013-2014, the AMC wanted to introduce the fund, but a reform in the tax laws for long-term admissions from one to three years forced the fund to hide the concept. “It is a must for international diversification, but I would like to suggest moving to existing funds with a proven track record,” said Viral Bhatt, founding member of Money Mantra.