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Kotak NASDAQ 100 Fund of Fund NFO Opens; Should You Invest?

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Kotak Mahindra Asset Management Company launched a new mutual fund on Monday that tracks the tech-heavy Nasdaq-100 index. The scheme is called Kotak NASDAQ 100 Fund of Fund and its New Fund Offer (NFO) will be open from 11 January to 25 January 2021.

 

About NASDAQ and investing in US stocks from India
 

About NASDAQ and investing in US stocks from India

Nasdaq Stock Market, also known as Nasdaq or NASDAQ, is an American stock exchange that is ranked second on the list of stock exchanges in the world by market capitalization of shares traded, behind the New York Stock Exchange.

Its NASDAQ-100 index tracks the largest 100 non-financial companies in the world in terms of market capitalization, and is heavily weighted towards companies in the information technology sector including names like Apple and Microsoft, and also other leading innovative businesses in the telecom, retail, wholesale trade & biotechnology like Netflix, Amazon, Tesla, Alphabet, Moderna, Zoom and Facebook.

Mutual funds that are linked to the Nasdaq-100 index will allow Indian investors to invest in these non-financial companies and take advantage of their stable and relentless boom.

An International mutual fund is the easiest option for retail investors to invest in stocks listed outside India.

Kotak NASDAQ 100 Fund of Fund is the second mutual fund in India, after Motilal Oswal's, to facilitate investment in the popular index.

Nasdaq Stock Market, also known as Nasdaq or NASDAQ, is an American stock exchange that is ranked second on the list of stock exchanges in the world by market capitalization of shares traded, behind the New York Stock Exchange.

Its NASDAQ-100 index tracks the largest 100 non-financial companies in the world in terms of market capitalization, and is heavily weighted towards companies in the information technology sector including names like Apple and Microsoft, and also other leading innovative businesses in the telecom, retail, wholesale trade & biotechnology like Netflix, Amazon, Tesla, Alphabet, Moderna, Zoom and Facebook.

Mutual funds that are linked to the Nasdaq-100 index will allow Indian investors to invest in these non-financial companies and take advantage of the stable and relentless boom.

Kotak NASDAQ 100 Fund of Fund is the second such mutual fund in India, after Motilal Oswal's, to allow investment in the popular index.

About Kotak NASDAQ 100 Fund of Fund

About Kotak NASDAQ 100 Fund of Fund

The NFO is open for subscription from 11 January to 25 January 2021. However, it is an open-ended scheme, which means investors can subscribe to the fund beyond 25 January as well.

The FoF (fund of funds) will invest in units of overseas ETFs or funds like iShares NASDAQ 100 ETF, Lyxor NASDAQ 100 ETF, and USA NASDAQ 100 Index Fund, which in turn, would invest in shares listed on NASDAQ-100, currently worth $15 trillion.

Investment objective as per the scheme document: The investment objective of the scheme is to provide long-term capital appreciation by investing in units of overseas ETFs and/ or Index Fund based on the NASDAQ 100 Index.

Asset allocation:

InvestmentsIndicative AllocationRisk Profile
Units of overseas ETFs and/or Index Fund based on NASDAQ 100 Index 95%-100% High
Debt schemes, Debt & Money Market Instruments, including Tri Party Repo^, G-Secs, Cash and Cash at call, etc. 0%-5% Low to Medium

Investment strategy:

As per Kotak AMC's scheme documents, "The Scheme follows a passive investment strategy and will predominantly invest in Units of overseas ETFs and/or Index Fund based on NASDAQ 100 Index. The AMC/ Underlying Scheme does not make any judgments about the investment merit of NASDAQ-100 Index nor will it attempt to apply any economic, financial or market analysis. The Scheme shall invest in Units of overseas ETFs and/or Index Fund based on NASDAQ 100 Index, except to meet its liquidity requirements. The scheme would also invest in units of Liquid/ debt schemes, debt and money market instruments as stated in the asset allocation table."

Fund managers: Arjun Khanna and Abhishek Bisen are the fund managers to the new scheme.

Benchmark Name: NASDAQ-100 TRI

Plans: Regular Plan and Direct Plan. Each plan offers a growth option.

Expense ratio: 1% on the regular plan and 0.65% on the direct plan

Minimum Investment Size:

  • Initial Purchase (Non-SIP) - Rs 5,000 and in multiples of Re 1 for purchases, and Rs 0.01 for switches.
  • Additional Purchase (Non-SIP) - Rs 1,000 and in multiples of Re 1 for purchases, and Rs 0.01 for switches.
  • SIP Purchase - Rs 1,000 (Subject to a minimum of 6 SIP instalments of Rs 1,000 each)
Points to consider before you invest

Points to consider before you invest

  • Nasdaq has rallied over 42% in one year's time and is currently near its record levels, which means its valuation is currently expensive and correction may be seen in the coming months.
  • The scheme has SIP options, which will help average out the costs of investment in comparison to lump sum investment, especially considering the high valuation of NASDAQ-100 stocks at the moment.
  • Nasdaq is dominated by non-financial companies while Indian market's benchmark indices (Sensex and Nifty) are dominated by financials, allowing Indian investors to diversify in terms of sectors apart from geographically.
  • Investing in international markets will help diversify one's overall investment portfolio.
  • Apart from the performance of the companies on the index, Indian investors will also benefit from the possible appreciation in US dollar or devaluation of the Indian rupee as it will increase the value of the holding.
  • Kotak Nasdaq 100 Fund of Fund will invest in Nasdaq 100 indirectly through US ETFs, which could add an extra layer of expenses, but the difference could be marginal.
  • Investors looking at investing in NASDAQ-100 can also consider Motilal Oswal's Nasdaq ETF, which also allows investors without demat and trading accounts to invest in the fund. It was launched in November 2018, which means its past performance can be tracked- that is a potential investor can check if the ETF has managed to replicate the sharp gains seen in the index in 2020.

Disclaimer

The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.

About the author

Olga Robert is an M.Com graduate covering equity markets and personal finance for nearly three years. Her interests include tax planning, equities, DIY personal finance management and government schemes.

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