PERSONALISED INVESTMENT MANAGERS
Investments in equity markets is all about dealing with risks and uncertainty. You cannot get exceptional return without taking any risk. Both risk and return are directly proportional to each other. But, when it comes to long-term investments, diversification is the key.
The basic idea behind the diversification is to provide the right balance to one’s portfolio. Diversification could be across sectors, industry, asset class, and even geographies. Generally, all different kinds of investments across different sectors/industry/asset classes don’t tend to perform the same across various market cycles. Hence, we diversify the portfolio to give it a buffer as when one segment doesn’t perform, the other does.
When we think of diversification, we often tend to ignore investments in other countries. If the stock markets have not performed well in a developed economy, they might have performed well in an emerging economy. Performance amongst various countries vary differently (refer to the graph below). Earlier foreign investments in India were not opened up, but we now have options to invest in other countries as well.
You can invest in foreign market through Feeder Funds and Fund of Funds available with various mutual funds in India. You can also invest in the global markets through global ETFs. We will be discussing two global ETFs listed on the stock exchange for global exposure.
This fund was launched in 2011, and it invests in the top 100 domestic and international non-financial securities listed on the NASDAQ Stock Market based on market capitalization. The benchmark is the NASDAQ-100 Index. It does not contain securities of financial companies, including investment companies. It is India’s first US Equity based ETF and has a very low correlation with all the Indian segments. Since it is listed on the exchange, investors can buy/sell units of the scheme in round lot of 1 unit and in multiples thereof. It can also be bought directly with the Mutual fund in creation unit size i.e. 100,000 units and in multiples thereafter. Its top holdings include companies like Apple, Amazon, Microsoft, Facebook, Alphabet, and Netflix.
The fund has delivered a CAGR of 23% over a five year period 19% over a 3 year period.
|1 Year||3 Year||5 Year||Since Inception|
|CAGR (%)||Current Value of Investment of ₹ 10000||CAGR (%)||Current Value of Investment of ₹ 10000||CAGR (%)||Current Value of Investment of ₹ 10000||CAGR (%)||Current Value of Investment of ₹ 10000|
|NASDAQ 100 Index (In INR) (Benchmark)||33.78||13378||21.44||17908||24.07||29398||25.22||51195|
|Nifty 50 (Additional Benchmark)||14.09||11409||10.00||13309||14.30||19507||10.37||20476|
|NAV (₹.) Per Unit (473.1472 : as on 30-June-2018)||360.8388||278.5463||174.4336||103.2365|
The major factors to look at while buying this ETF is the liquidity concerns and its AUM size (₹80 cr). And, the ETF is being traded at premium in the secondary market. The NAV of the ETF is 494 but is being traded at 517 on the exchange. Buying directly from the Mutual Funds is not a feasible option as investors can buy/sell only at the creation unit size of 100,000 units which amounts to ₹4.94 crores.
This fund was launched in 2010. It invests in the securities as represented by Hang Seng Index of Hang Seng Data Services Ltd. It invests in the securities in the same proportion as in the Index. The fund has an AUM of 7 crores. The minimum investments through Stock Exchange is 1 unit and in multiples thereof. It can also be bought directly with the Mutual Fund in creation unit size i.e. 2500 units and in multiples thereafter.
|Performance of Reliance ETF Hang Seng BeES as on 31/05/2018|
|Particular||1 Year CAGR %||3 Year CAGR %||5 Year CAGR %||Since Inception|
|Reliance ETF Hang Seng BeES||26.31||7.61||12.58||12.08|
|B: Hang Seng Index INR (TRI)||27.90||8.88||13.93||13.25|
|AB: Nifty 50 (TRI)||13.30||9.79||13.78||10.81|
|Value of ₹10000 Invested|
|Reliance ETF Hang Seng BeES||12,631||12,468||18,091||25,576|
|B: Hang Seng Index INR (TRI)||12,790||12,911||19,204||27,859|
|AB: Nifty 50 (TRI)||11,330||13,246||19,072||23,277|
|Inception Date: Mar 09, 2010|
|B - Benchmark | AB - Additional Benchmark | TRI: Total Return Index|
|Fund Manager: Jahnvee Shah (Since Apr 2017 till 24.5.2018) Siddharth Deb (Since Nov 2016), Kinjal Desai(w.e.f 25.05.2018)|
The fund has generated a CAGR of 12.58% over the 5-year period and 7.61% over 3 years. The NAV of the ETF is 3052 and on exchange it is being traded at the price of 3372. Again the fund size is a major concern while investing in this ETF.
While diversification is important for all portfolios, the key is not to over-diversify as it kills the alpha returns generated by the portfolio. Plus, global diversification should not be done for the sake of diversification as understanding the macro and micro situations of a different country are very specialised skills.
And it has to be done based on
Also, Indian equities have performed well over the past decade and if you don’t have the risk appetite for global exposure you should not take the risk.