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New Funds Come Knocking - The Fidelity Global Real Assets Fund
January 28, 2010

The Fidelity Global Real Assets Fund NFO is now available on the Fundsupermart.com


Author : iFAST Research Team



Untitled Document

NFO Period

11 January 2010 to 29 January 2010

Fund Objective

To aim to achieve long-term capital growth from a portfolio which will be primarily invested in Fidelity Funds - Global Real Asset Securities Fund, an offshore fund launched by Fidelity Funds (an open ended investment company incorporated in Luxembourg) and similar to an Indian mutual fund scheme.

Indicative Asset Allocation

  • Minimum of 80% - shares/units of the underlying scheme/foreign securities
  • Maximum of 20% - Money Market instruments and/or liquid/cash schemes of mutual funds registered with SEBI

Fund Managers

Mr. Subramanian Balakrishnan (for the Fund of Fund) and Amit Lodha (Fidelity Funds - Global Real Asset Securities Fund, the mother fund)

Benchmark Index

A custom benchmark which is a blend of the following indices - MSCI ACWI Industrials, MSCI ACWI Real Estate, MSCI ACWI Utilities, MSCI Materials and MSCI Energy. The weights assigned to each individual index while calculating the custom benchmark is 20%, 20%, 10%, 20% and 30% respectively.

Minimum initial investment

Rs. 5,000 and multiples of Rs. 1000/- thereafter

Exit Load

1% (for redemption within 12 months from the date of allotment)

Risk Rating

10 (The risk rating of ‘10’ means that the fund is recommended for investors with ‘a very High Risk’ appetite)

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Fundsupermart Fund Classification

Type of Fund    Fund Class Style of Investing

 

Equity Fund

 

Debt Fund

 

Balanced Fund

 

Liquid Fund

 

Domestic Fund of Funds

 X

International Fund of Funds

 

Diversified

 

Contra

 

Speciality

 

Sectoral

 X

General

 

Growth Style

 

Value Style
 X
Both

Focus on Real Assets 

Real assets are physical or identifiable assets like gold, land, equipments, etc. The mother fund invests money into the stocks of real asset companies like energy, commodity and metals, industrials, real estate and utility companies. Referring to Chart 1, the portfolio does not have highly concentrated investments in any one sector which is unlike any other international fund of funds available in India.

Table 1: Performance of the mother fund since 2 September 2009

 

Fund Returns (%)

Benchmark returns (%)

Excess Returns (%)

1 Month 3.8 2.3 1.5
3 Month 5.6 5.8 -0.2
Since Inception 16.1 14.3 1.8
Source: FIL Limited/Standard &Poor’s, Absolute Returns, gross of fees. Based in US dollar, as of 31 December 2009.

Why should one invest in this fund?

  • Gives an exposure to the global diversified real asset companies like global industrial, energy, real estate and utility companies  , which you as an investor may not have access through other funds in India
  • The fund has no style or cap bias, so the fund is free to pursue both growth and value opportunities. Also, the fund invests into suitable small-cap, mid-cap or large-cap securities
  • Sector allocation is dynamic with a maximum variation of 10% from that of the benchmark

Chart 1: Portfolio allocation of the mother fund

However, the investor must consider the following before investing

  • The fund uses a customised index which is a blend of five other indices. The values of customized index might not be available on a day to day basis
  • The mother fund i.e., Fidelity Funds – Global Real Asset Securities Fund was launched in September 2009 so the performance history of the fund is of hardly 4 months to review
  • The mother fund manager has been managing this fund for a short span, since past April 2008
  • The tax treatment is similar to that of a debt mutual fund. Hence, both your short term and long-term capital gains is taxed
  • Since the mother fund invests into securities across the world, this fund is exposed to additional foreign exchange rate risk

Conclusion

The fund is suitable for an investor with a very high risk appetite. From a portfolio perspective, the fund gives exposure to global real asset classes which is unique as there are no funds in India that offer such an exposure. However, the fund has a track record of only four months. Also, the fund manager  has a limited experience of 22 months as a fund manager. Keeping in mind these details, one can consider an allocation of a maximum of 10% in the equity part of their portfolio.

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iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.

 


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