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Mirae Asset Mutual Fund offers new route to investing in US bluechip

Mirae Asset Mutual Fund offers new route to investing in US bluechip

01 Sep 2021

Investors looking for core international equity allocation can consider the passive new fund offer (NFO) of Mirae Asset S&P 500 Top 50 ETF or its Fund of Fund (FoF).

Given the sharp run-up in equities and the rich valuations, investors could stagger their investments through a systematic investment plan (SIP) over the next one year.

The S&P 500 Top 50 consists of the 50 largest companies making up the S&P 500 index, giving investors exposure to bluechip companies in the US along with sectoral and currency diversification.

At each annual reconstitution, the top 50 companies in the S&P 500, based on free-float market capitalisation, are selected for index inclusion. The NFO is currently open and closes on September 14 and the minimum investment size is ₹5,000. There is an exit load of 0.5% for redemptions within three months.

The fund house is also launching an FoF investing in units of the ETF, which will help investors who do not wish to use the exchange route to investing.

Apple, Microsoft, Alphabet (Google), Amazon and Facebook are amongst the top five holdings of the fund and the top three sectors are information technology (38.5%), communication services (18.4%) and consumer discretionary (13.5%).

The ETF has an expense ratio of 37 basis points, while the FoF has an expense ratio of 62 basis points for the direct plan and 105 basis points for the regular plan.

Financial planners believe investors must geographically diversify their equity mutual fund portfolios and doing it passively is one of the better ways. “It is well known that it is extremely difficult to generate alpha in the West. Hence, investors are better off taking exposure through this passive route to the top 50 companies,” said Nirav Karkera, head of research, Fisdom.

A note by Mirae Asset MF shows that S&P 500 Top 50 Index has historically outperformed S&P 500 Index. Over a 10-year period, in rupee terms, the S&P 500 Index has returned an annualised 21.5% as against the S&P 500 Top 50 return of 22.6%. The S&P 500 Top 50 Index has outperformed S&P 500 Index in 7 out of 11 calendar years.

“The companies in the portfolio are universal brands, giving investors an opportunity to participate in global trade,” said Vaibhav Porwal, co-founder, Dezerv.in, a wealth management company.

Vaibhav recommends 15-20% of the equity portfolio should be allocated to international funds, of which about one-third can be allocated to this fund.