Is it a good suggestion to put money into ICICI MF’s new FOF?
ICICI Prudential AMC launched a novel Fund of Fund (FoF)—ICICI Prudential Strategic Metal & Energy Equity Fund of Fund, which supplies publicity to the worldwide corporations in gold mining and oil & fuel sector.
The scheme invests in an offshore fund—First Trust Strategic Metal and Energy Equity UCITS Fund, which is managed by an American monetary providers agency – First Trust Advisors L.P.
The underlying is an actively managed fund with low-track file because it was launched solely in February 2021. Since inception, the fund delivered 17.21% towards its benchmark return on 12%.
The NFO (new fund supply) for the ICICI’s FoF opened for subscription on 17 January 2022 and closes on 31 January 2022.
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Why oil & gold?
The AMC instructed Mint that the fund provides publicity to international gold and oil fairness corporations, which in any other case are usually not current in India. It additionally highlighted that the scheme aligns with ICICI’s philosophy on shift to ‘value’ technique.
Stating that the highest two imports listed below are oil and gold, the fund home factors that the technique is a hedge towards potential declines within the rupee on account of potential spikes in oil and gold costs.
This is mirrored within the funding course of, which is designed to assign portfolio weightage to each the commodities based mostly on rupee motion.
As on December 2021, the fund has an publicity in the direction of oil & fuel and gold mining corporations to an extent of 69% and 31%, respectively.
What do specialists say?
“Key dangers to be careful for are disruption prompted on account of a shift in demand in the direction of electrical automobiles. Also, conventional fuels like diesel and gasoline are progressively getting changed by different low-emission fuels like hydrogen and renewable fuels,” mentioned Suvajit Ray, head of merchandise, IIFL Securities.
But contemplating that there’s a lengthy method to go earlier than the transition and India continues to import oil and gold commodities, specialists imagine that buyers with high-risk urge for food can park a portion of their portfolio.
Santosh Joseph, founder at Germinate Investor Services LLP, mentioned, “Investing in these commodities will off-set the impression of costs going up (inflationary stress) since your portfolio additionally goes up. And any return from rupee depreciation shall be a bonus.”
Sriram B.Okay.R., senior funding strategist at Geojit Financial Services, mentioned it would profit “Only these with understanding about sectoral funds and their cycles and people who are already having worldwide publicity however want to have non-tech portfolio and extra into vitality and metals.”
“The funding ought to be solely a part of a tactical allocation of no more than 10-15% of investor’s portfolio,” Joseph concluded.
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