GEMGAZE
February 2013
Lifecycle
investing offers the lifeline
Depending on the asset allocation, Fund of
Funds can be compared to equity-diversified funds, balanced funds, or debt
funds. The performance of FoFs is commendable compared with other funds over
the long term. For example, average returns from equity-diversified funds in
the past five years have been 19.92%. The Sensex delivered 19.30% returns in
the period. FT India Life Stage FoF 20’s five-year returns are 19.27%; ICICI
Prudential Advisor–Very Aggressive has given returns of 19.29% in the period
and Birla Sun Life Asset Allocation Aggressive has returned 20.79%. Similarly,
five-year average returns of balanced funds (equity-oriented) are 16.42%. Based
on an investor’s age, these funds provide an option to put money in schemes
with different asset allocations, which is essential to lifecycle investing. A
person in his 20s can go in for an aggressive or a very aggressive fund and
someone in the 50s can go in for a conservative or a very conservative fund. If
an investor had to shift between funds, it would attract capital gains tax and
exit load. In FoFs, there is no such liability. Moreover, when a fund manager
invests, he takes into consideration the cash level and the equity-debt ratio
of each fund in the portfolio. The FoF is structured in such a way that the
equity-debt ratio and the cash level of individual funds should not affect the
overall mandated allocations.
All the GEMs that figured in the February 2012 GEMGAZE have
retained their pre-eminent position in the February 2013 GEMGAZE also.
FT India Life
Stage Fund of Funds Gem
Franklin Templeton AMC offers five plans based on life stages that
will suit your age profile - FT India Life Stage FoF 20s, FT India Life Stage
FoF 30s, FT India Life Stage FoF 40s, FT India Life Stage FoF 50s Plus, and FT
India Life Stage FoF 50s Floating Rate. The first four plans were launched in
November 2003 and the last plan was launched in July 2004. All these are plans
of a single fund that has assets of around Rs 107 crore. The AUM of each plan
is Rs 10.67 crore, Rs 7.43 crore, Rs 11.83 crore, Rs 11.89 crore, and Rs 65.54
crore respectively. The top three sectors in the portfolio are
finance, energy, and technology. Allocation to large
caps in the various plans range from a low of 55% to a high of nearly 65%. The
allocation to equity tapers from 81% in the first plan to a measly 20% in the
last plan. The one-year returns of the plans are 12.45%, 11.74%, 11.56%,
10.16%, and 9.49% respectively. They have surpassed their respective
category averages but for the first and last plans. While
the expense ratio for all the plans is the same at 2.75%, the portfolio
turnover ratio is 29.16%, 15.17%, 6.5%, 11.45%, and 16.97% respectively.
ICICI Prudential Advisor Fund Gem
ICICI
Prudential Mutual Fund offers Fund of Funds through five plans launched in
November 2003: ICICI Prudential Advisor–Very Aggressive, ICICI Prudential Advisor
–Aggressive, ICICI Prudential Advisor–Moderate, ICICI Prudential
Advisor–Cautious, and ICICI Prudential Advisor–Very Cautious. The AUMs of
Aggressive, Moderate, and Cautious Plans are Rs 7.27 crore, Rs 5.31 crore, and
Rs 3.35 crore respectively. The top three sectors in the portfolio are finance,
energy, and metals or FMCG. Allocation to large caps hovers around 65% in all
the plans. The allocation to equity is 51%, 46%, and 14% respectively. The
one-year returns of the plans are 9.45, 10.05%, and 8.62% respectively. While
the expense ratio for all the plans is the same at 0.75%, the portfolio
turnover ratio varies a great deal at 14%, 70%, and 137% respectively.
Birla Asset Allocation Plan Gem
Birla Asset Allocation Plan is an open-ended fund of funds, launched in January 2004, which offers three plans – Aggressive, Moderate, and Cautious. The AUM of Aggressive, Moderate, and Cautious Plans is Rs 9.98 crore, Rs 6.49 crore, and Rs 5.16 crore respectively. The top three sectors in the portfolio are finance, construction, and engineering. Allocation to large caps hovers around 60%. The allocation to equity is 78%, 59%, and 21% respectively. The one-year returns of the plans are 6.5%, 9.6%, and 9.23% respectively. The expense ratio for all the plans is low at 0.35%.
FT India Dynamic PE Ratio Fund of Funds Gem
FT India Dynamic PE Ratio Fund of Funds is a hybrid fund, which moves into equity and debt in an automated manner. The fund protects downside and behaves conservatively because of its mandate. In other words, the fund automatically rebalances its asset allocation. The AUM of the fund is an impressive Rs 1299 crore. The top three sectors in the portfolio are finance, energy, and technology. Allocation to large caps is high at 85%. The allocation to equity at present is 61%. The one-year return of the fund is 10.20% as against the category average of 9.85%. While the expense ratio is at 2.71%, the portfolio turnover ratio is 35.72%. The idea behind the fund is simply great. This fund is equivalent to a wise portfolio manager that has no ego, no delusion to beat the market, and certainly no love for the stocks that it owns. It simply loves one thing; to provide returns and minimize the risk that market volatility exposes investors to. The fund has a great concept. This is good for investors who do not have time to worry about asset allocation as this fund takes care of it. Even otherwise, dynamic PE fund is good for investors with medium to low risk appetite. Investors should invest in dynamic PE fund keeping longer investment horizon in mind.
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