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The move comes amid soaring US technology stocks (Bloomberg)
The move comes amid soaring US technology stocks (Bloomberg)

Kotak MF launches scheme for tracking Nasdaq

  • The scheme is a fund of funds (FoF), which will invest in overseas ETFs and index funds tracking the Nasdaq
  • Motilal Oswal also launched its own FoF to invest in the Motilal Oswal Nasdaq ETF in November 2018

Kotak Asset Management Co. on Monday launched a mutual fund scheme tracking the Nasdaq index, the second such scheme in India after the first by Motilal Oswal Asset Management Co. in March 2011.

The move comes amid soaring US technology stocks. The Nasdaq index is dominated by tech stocks like Apple, Microsoft, Amazon, Tesla, Alphabet and Facebook. The scheme’s New Fund Offer (NFO) will run from 11 to 25 January. As an open-ended fund, investors can subscribe after this date as well. The scheme is a fund of funds (FoF), which will invest in overseas Exchange Traded Funds (ETFs) and index funds tracking the Nasdaq such as the iShares Nasdaq ETF and Lyxor Nasdaq ETF.

The first such scheme—Motilal Oswal Nasdaq 100 ETF—has delivered a return of 25.04% CAGR since its launch, 30.83% over the past three years and 49.58% over the past one year, according to Value Research data (as of 8 January). However, the Motilal Oswal Nasdaq ETF directly holds the stocks of US tech companies whereas the Kotak Nasdaq 100 Fund of Funds will hold them indirectly through US ETFs. This adds an extra layer of expenses, but the difference can be marginal if low-cost ETFs are chosen.

Motilal Oswal also launched its own FoF to invest in the Motilal Oswal Nasdaq ETF in November 2018 to allow investors without demat and trading accounts to invest in the fund. An FoF can be bought and sold like any other mutual fund. An international FoF is denominated in rupees even though its holdings are in foreign currency. Its value rises with rupee depreciation and vice versa.

“The Nasdaq has a low correlation with the Indian market. It is also dominated by tech stocks, instead of the financials that dominate the Indian market. It is also a hedge against possible underperformance of the Indian market and currency," said Harsha Upadhyaya, chief investment officer, equity at Kotak Mahindra Asset Management.

The scheme will have an expense ratio of 1% on the regular plan and 0.65% on the direct plan, said managing director Nilesh Shah.

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