Invesco Mutual Fund bets on digital lifestyle with Global Consumer Trends Fund

Invesco Mutual Fund has launched its Global Consumer Trends Fund of Funds (FoF) focusing on global changes in standard of living, demographics, connectivity and lifestyle. The Fund will feed into the Invesco Global Consumer Trends Fund, a Luxembourg domiciled fund. The underlying fund is benchmarked to the MSCI Consumer Discretionary Index and has a size of $2.76 billion.

The fund, launched on 4 December, is dominated by e-commerce (31%), followed by restaurants, hotels and casinos (22%) and video games, entertainment and software (17%). It is underweight on traditional sectors like automobiles and textiles.

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In its presentation, Invesco Mutual Fund said trends such as internet and mobile penetration, retail spending going on e-commerce, video gaming, e-sports and subscription based music streaming will continue to play out. Post pandemic, retail spending on ‘experiences’ such as travel and leisure, consumer durables and home improvement will pick up.

It aims to have at least 70% of the portfolio focused on companies tracking the discretionary needs of consumers. The fund has 67% of its portfolio in the US, followed by 13% in other developed markets and 21% in emerging or frontier markets.

Its largest holding is Amazon (10.2%), followed by Alibaba (7.9%) and Penn National Gaming (6.4%) a casino and racetrack operator. In rupee terms, the underlying fund has given returns of 19% CAGR over the past 5 years and 22.6% over the past 10 years, as of 31 October. Since inception in 1999 returns are 12.4% CAGR.

"This fund is about where the consumer spends his time and where he spends his money. It is more core than thematic. Consumer discretionary stocks in India are expensive because there is a scarcity of companies in that bucket,” said Saurabh Nanavati, CEO, Invesco Mutual Fund.

“The expense ratio will be 2.25%. We feed into the S share class of the underlying fund which has the lowest expense ratio for institutions which at 0.83% and the balance 1.42% is charged by the Indian AMC,” he added. Global markets have seen a run up post the pandemic-driven dip in April. However, Nanavati argued for a long-term view on the fund.

“As far as valuations go, you need to get into such funds for 10 years. Consumer trends change. Prior to Covid the fund had cruise liners in its portfolio. In February, those stocks were sold off. Now the biggest exposure is video games, you have five gaming companies in it. Such companies are doing extremely well post Covid,” he said.

“In any country-specific fund, there will be financials, utilities and energy. None of this is there in this. Its overlap with a US equity fund is less than 15%, with NASDAQ is 17%,” he added.

Experts took a cautious stance of the fund. "Global allocation should ideally be through a broad-based fund like one following the S&P 500 rather than a thematic one. Don't crowd the international side of your portfolio with too many schemes," said Amol Joshi, founder, Plan Rupee Investment Services, a Mumbai-based mutual fund distributor.

Munish Randev, founder, Cervin Family Office, a Sebi-registered investment advisory firm concurred. “The fund can be a supplemental allocation in your international portfolio, once your core offshore equity portfolio is sorted with exposure via diversified ETFs. The main intent of exposure to this fund is to have a higher weightage to the broader consumption theme maybe with some niche plays," he said.

They also asked investors to spread out their investments. “Investors keen on diversifying abroad can consider the fund, however, they should not be buying the past returns. They can take a staggered approach and keep a five-seven-years investment horizon,” said Prableen Bajpai, founder, Finfix Research and Analytics Pvt Ltd, a mutual fund distributor.