Mirae Asset’s two US funds good but high-risk bets

Mirae Asset’s two US funds good but high-risk bets

Investors with a high risk appetite looking to make an international allocation to technology and consumer theme could consider taking some exposure to the new fund offers (NFOs) from Mirae Asset for two passive schemes.

Financial planners, however, believe those investors who already own the popular Nasdaq 100 funds or ETFs from other fund houses could skip this offering.

The two new passive funds will track the NYSE FANG+ ETF index, which consists of technology and consumer companies.

Mirae Asset NYSE FANG+ ETF is an open-ended scheme tracking the FANG+ Total Return Index while Mirae Asset NYSE FANG + ETF Fund of Funds will predominantly invest in Mirae Asset NYSE FANG+ ETF.

The NFOs are currently open till April 30 for the FANG+ ETF and till May 3 for the FANG+ ETF Fund of Funds. Investors can start with ₹5,000.

The NYSE FANG+ Index is an equal-weighted index of 10 stocks, making the portfolio concentrated. The index is rebalanced every quarter. The 10 stocks are Facebook, Amazon, Apple, Netflix, Alphabet (Google), Tesla, Twitter, Alibaba, Baidu and Nvidia.

This has been one of the best performing indices returning 105%, 42.8% and 46.8% over the last one, three and five years, respectively.

In terms of valuations, the index trades at a forward PE of 36 and the companies have a combined market cap of $7.7 trillion. Eight of the 10 stocks in NYSE FANG+ overlap with the Nasdaq 100 though the weights are different.

Financial planners point out that the Nasdaq 100 is more diversified across sectors and stocks. There are 100 companies across computer hardware and software, telecommunications, retail/wholesale trade and biotechnology.

“Technology consumer companies are a high-growth space. Investors with no exposure and comfortable with a concentrated portfolio that could be more volatile can allocate 5%. Those who already own a Nasdaq 100 fund could stay away,” said Rupesh Bhansali, head-distribution, GEPL Capital.

Financial planners also flag the additional currency risks that international funds carry. Besides, the returns could be volatile given the concentrated portfolio and many believe investors should be careful after the run-up in the US tech stocks over the last five years.

“Concentrated portfolio and high valuations may not be a wise option for retail investors who do not understand international markets,” said Rohit Shah, founder, Getting You Rich. He said investors should buy into diversified equity mutual fund schemes that give the flexibility to move across stocks and are not restricted to a theme.

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