Invest in ICICI Pru’s FoF for global diversification | Economic Times

Investors looking for global allocations based on economic trends and flows could consider the ICICI Prudential Global Allocation Fund of Fund. This fund has a 51% allocation to emerging markets (EMs) and 49% to developed markets (DMs) through investments in schemes that invest in such economies.“The fund helps you diversify between emerging and developed markets, using a mix of valuation parameters like price to book, emerging market flows, market cap and performance,” said Nasser Salim, cofounder, Flexi Capital.With an increasing number of products available in the international space, financial planners believe it is difficult for investors to choose products across themes and territories. The fund of fund has the flexibility to spread its bets across several geographies and vary allocations based on the fund manager’s views.The five funds that the scheme holds in its portfolio are: ICICI Prudential US Equity Fund (26.6% allocation), Nippon India ETF Hang Seng BeES (25.4%), Franklin Asia Equity Fund (21.5%), Nippon Japan Fund (20.9%) and Aditya Birla Sun Life Commodities Equity Fund – Global Agri Plan (0.7%).The scheme, launched in October 2019, has returned 25% over the last year, compared to the S&P 500 return of 36%.The fund has increased exposure to the US to 36% since the outbreak of the Covid-19 pandemic in March 2020 given the higher correction there compared to emerging markets. However, it trimmed it to around 26% in May as valuations rose.Among developed markets, it has increased exposure to Japan in April and May 2020 on cheaper valuations. The fund manager’s view was that 45% of the listed companies in Tokyo were trading below book value last April.Financial planners believe such tactical strategies work well over a five-year period. “The fund can go overweight on any of the markets and there are no tax implications for the investor,” said Rupesh Bhansali, head-distribution, GEPL Capital. Bhansali recommends investors allocate 10-15% of their portfolio to international equities. Of this, half could go to ICICI Prudential Global Allocation Fund of Fund, he said.The fund of fund is tax friendly. Capital gains booked within three years would be subject to short-term capital gains tax as FoF is treated as non-equity funds. Gains beyond three years are taxed at 20% with indexation, which reduces tax liability. 83902741