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Chart Talk: Mirae Asset China Advantage Fund
September 15, 2011

In this article, we highlight the key points of this fund.


Author : Niketa Agarwal



 Chart Talk: Mirae Asset China Advantage Fund

Key Points

  • The Mirae Asset China Advantage Fund (MACAF) was launched on 16 November 2009.
  • This is a country-specific Fund of Fund (FoF) investing into the mother fund, Mirae Asset China Sector Leader Equity Fund (MACSLEF).
  • Difference in the mother fund and the feeder fund returns is seen which can be attributed to the currency difference.
  • The fund has an exit load of 1% if redeemed within 90 days, 0.5% if redeemed after 90 days but before 180 days, and nil, thereafter.
  • The mother fund, a new fund launched during market downturn in September 2008 has consistently outperformed the index by 5.95% since August 2010.
  • The feeder fund, has outperformed the index for most of the period since mid July 2010 by 4.02%
  • It carries a risk rating of 8 which is a higher risk rating (1 being the lowest, 10 being the highest) on our platform as it is a global fund

Mirae Asset China Advantage Fund (MACAF), the feeder fund, invests in the mother fund, ) Mirae Asset China Sector Leader Equity Fund (MACSLEF) with an average allocation of 97.49% (since August 2010.  The mother fund is a relatively new fund as it was launched in September 2008 and aims to achieve long-term capital appreciation by investing into equities and equity related securities of companies that lead respective sectors in China (limited to B shares) and Hong Kong.  (Source: MACAF Fact Sheet and MACSLEF Fact Sheet)

Funds versus Benchmark

We compared the Mirae Asset China Advantage Fund performance with the returns generated by the benchmark (MSCI China Index) since 01 January 2010. We also compared the Mirae Asset China Sector Leader Equity Fund returns with the benchmark (MSCI China Index) for the same time period (i.e. since 01 January 2010). This is done in order to get a better idea of the performance of the two funds with their benchmark. For the comparison, the daily NAV of the funds have been compared with the daily NAV of the index since 01 January 2010. The NAV of the index and the funds have been rebased to 100.

The fund has outperformed the index for most of the period since mid July 2010. The fund outperforming the index implies that the fund has provided greater returns than its index.

Conversely, the fund underperforming the index implies that the fund has provided lesser returns than the index.

Therefore, although Mirae Asset China Advantage Fund is a new fund and was launched in mid November 2009 it has outperformed its benchmark.

During the negative downturn of the fund it has not tanked much as seen from the preceding chart and has underperformed the index not by a huge margin.

 

Chart 1: Feeder Fund vs. Benchmark(The returns from Nov-Dec 2009 have not been considered as the fund was launched on 16 November 2009 and there was insufficient data for Oct-Dec quarter.) (Source: iFAST Compilations)

  • The average outperformance of the fund since Jan 2010: 4.02%
  • The average underperformance of the fund since Jan 2010: -2.22%

The fund has outperformed the index consistently from an appreciable difference since August 2010.

As it can be seen from the comparison of Chart 1 and Chart 2 the returns of the feeder fund are diluted with respect to the returns of the mother fund. This dilution in returns can be attributed to the currency difference.   

The mother fund is also a new fund launched in September 2008, however it has been able to outperform the index consistently since August 2010.

Also, although the mother fund was launched when the markets were down, it has provided good returns to the investor since August 2010.

Chart2: Mother Fund vs. the Benchmark(The returns till Jan 2010 have not been considered in order to compare the performance of the mother fund with the feeder fund which was launched on 16 November 2009) (Source: iFAST Compilations)


  • Average Outperformance of the Fund since Jan 2010: 5.02%
  • Average Underperformance of the Fund since Jan 2010: -4%

Mother Fund vs. Feeder Fund

We also compared the returns of the mother fund (Mirae Asset China Sector Fund) with the feeder fund (Mirae Asset China Advantage fund), in order to track the performance of the funds. We compared the daily NAV of the funds from August 2010 till June 2011. The change in Chinese Yuan or Renminbi (RMB code: CNY)) against Indian Rupee is also considered for the same time period (from August 2010 till June 2011).

Mirae Asset China Advantage Fund replicates the performance of the Mirae Asset China Sector Leader Equity fund despite the currency fluctuation as represented by the green area in the chart.

The difference in returns between the mother fund and the feeder fund can be to a certain extent contributed by the currency difference.

The RMB against Indian currency has appreciated by 1.60% for the same time period (from August 2010 to June 2011) which to a certain extent can result in erosion of returns.


Mirae Asset China Sector Leader Equity Fund invests 89.1% in China, 8.8% in Hong Kong and 2.2% in money market instruments.

Chart 3: Mother fund vs. the Feeder Fund(Source: iFAST Compilations)

The fund also has greater focus towards consumer sector (22.8%) followed by industrials (8.5%). (Source: Mirae Asset China Sector Leader Equity Fund Factsheet)

Conclusion

Mirae Asset China Advantage Fund outperforms the index as it taps the performance of the Mirae Asset China Sector Leader Equity Fund. Mirae Asset China Sector Leader Equity Fund is an actively managed fund which takes into account the growth pattern, inflation, country laws and other factors that could affect the performance of the fund. Simultaneously, the fund’s objective is to tap the growth of the prospering sectors in China and Hong Kong.
To avoid concentration risk and gain exposure to a country specific fund, investors can consider Mirae asset China advantage Fund. However, it carries a risk rating of 8 which is a higher risk (1 being the lowest, 10 being the highest) on our platform as it is a global fund and factors like inflation, country laws and currency differences can affect the performance of the fund.  Therefore, Aggressive and Moderately Aggressive investors should review the current market situation (in China and India) and accordingly, decide to diversify part of their portfolio into this fund.


Disclaimer: 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 scheme information document including statement of additional information. 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 on the website.Please read our disclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of the Scheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement of Additional Information and Scheme Information Document carefully before investing.



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