Should you consider investing in DSP Global Innovation FOF?
What kind of Global Exposure can it give you?
Will it help you create wealth?
Let us analyze and review this NFO.
Table Of Contents:
About DSP MUTUAL FUND:
DSP Mutual fund ranks 10th out of 41 AMCs running in India.The firm manages assets worth Rs. 1.07 Lakh Crores of which around 60% are invested in equity funds spread across 24 schemes.
DSP GLOBAL INNOVATION FoFNFO – Basic Features:
The primary objective of this NFO is to
- invest in global mutual funds and ETFs,
- which invest in innovation and technology-themed companies.
Why have International Equity Exposure in Your Portfolio?
After the COVID-19 market fall, diversification of funds seems to be a valid point among Indian investors. As of now, there are 63 global funds, 21 out of them were launched in 2021.
The ultimate target of this NFO is to withstand a market crisis in the future and discover new markets.
Having global equity exposure will bring better diversification and stability to your portfolio.
Investment Strategy of DSP Global Innovation Fund:
DSP Global Innovation FoF aims to invest in global ETFs, active and passive funds that are willing to invest in innovation and technology-related companies for earning higher returns. A total of six global funds were chosen to invest, in which two of them are a passive type making up one-third of the total portfolio.
The range of weight oscillation of individual funds can vary from 10 – 50% and the weightage of funds is decided based on certain factors such as
- market capitalization
- overall geographic allocation
- portfolio overlap
- overall portfolio volatility & returns
On an annual basis, weights will be rebalanced accordingly. The themes that were selected to invest in are semi-conductors, Internet, Interactive Media, Software, and e-commerce.
SEBI & The Limit In Investing Overseas Markets:
As per the SEBI rules, in overseas market fund houses, are restricted to invest a maximum of US $1 billion, and for the overall mutual fund industry, the maximum limit is set to the US $7 billion.
On the other hand, Investments in overseas ETFs are restricted to the US $ 300 million/AMC and the US $ 1 billion for the Industry. SEBI had advised DSP Global Funds to start their investments in overseas ETFs on account of the industry limit of US $ 7 billion in overseas funds.
Pros of DSP Global Innovation FoF:
Some of the highlighting advantages of investing in this DSP global FoF are:
- An equity fund invested for the long term has more probability of giving higher returns.
- Investments in the global market lead to healthy diversification.
- Currency appreciation can bring additional returns to this fund
- Exposure to global equity funds can bring stability to your portfolio returns.
- If the chosen innovation theme works out, then it has the potential to give a higher return.
Is There Any Risk In The Investment Of DSP Global Innovation FoF?
Yes, any kind of investment will have its own risk and return. Some of the notable drawbacks involved in the investment of DSP global innovation FOF are:
- Innovation-oriented funds have shown periodic high drawdowns and volatility in returns compared to the fund’s benchmark. So this fund may add more volatility to your portfolio.
- Concentration risk is one of the major drawbacks associated with investing in thematic funds.
- As this fund is investing in an overseas market, this brings geopolitical risk to your portfolio.
- Additional risk may arise if the currency rate declines in the invested nation.
- If the invested innovation theme fails to succeed, then the consequences will be much worse. Then, the fund can take more time to recover.
- Investors who are willing to hold the funds for the short term can avoid equity funds.
- First-time investors and conservative investors can ignore this DSP Global InnovationFoF.
Final Take Away:
If you are a first-time investor or a conservative investor, please ignore this fund. You can consider having basic native funds for your core portfolio first.
In case you are looking for global diversification after building your core native portfolio, then you can consider existing global funds with consistent performance and a good track record.
If you are an aggressive investor and also have spare money and want to experiment with new opportunities, then consider this fund. However, it is better to consult your financial planner before making any investment decision.
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