Active Stocks
Tue Mar 19 2024 11:50:47
  1. Tata Consultancy Services share price
  2. 4,018.90 -3.04%
  1. Tata Steel share price
  2. 148.10 -1.00%
  1. Bharti Airtel share price
  2. 1,232.60 0.62%
  1. Power Grid Corporation Of India share price
  2. 261.00 -1.51%
  1. ITC share price
  2. 409.75 -1.83%
Business News/ Mutual Funds / News/  Axis MF launches ESG fund with foreign twist
BackBack

Axis MF launches ESG fund with foreign twist

Its partial allocation to foreign stocks places the fund in a unique basket of hybrid India-international combo funds which benefit from equity taxation while participating in foreign markets.

Axis MF ESG fund: The New Fund Offer (NFO) for the fund will run from 22 January to 5 FebruaryPremium
Axis MF ESG fund: The New Fund Offer (NFO) for the fund will run from 22 January to 5 February

Axis Mutual Fund today announced the launch of its Environment, Social and Governance (ESG) Fund, joining the ranks of mutual funds cottoning on to this trend. The Axis move was preceded by two other major launches in recent years. SBI Mutual Fund reclassified its equity fund as an ESG Fund during the industry wide reclassification exercise of 2018.

Quantum Mutual Fund launched its Equity ESG Fund in July 2019. However in a departure from its peers, Axis ESG Fund will invest up to 30% of its corpus in foreign stocks. Its partial allocation to foreign stocks places the fund in a unique basket of hybrid India-international combo funds which benefit from equity taxation while participating in foreign markets.

(Read: Do domestic-global funds work for you?)

The fund will be managed by Jinesh Gopani who also runs Axis Long Term Equity Fund, a large ELSS fund from the Axis stable. The New Fund Offer (NFO) for the fund will run from 22 January to 5 February 2020. As an open ended fund, it will be available for subscription thereafter on an ongoing basis.

The AMC will follow a three-stage process while selecting stocks for the fund. First, it will exclude problematic sectors like tobacco and alcohol. Second, it will screen out stocks which attract ESG red flags. Third, it will carry out a qualitative ESG analysis of each company, complementing its fundamental research on the company. Schroeders, a global asset manager, will advise on the foreign portion of the fund. ESG factors will include issues such as climate change, natural resource use, product safety, business ethics and transparency.

Dismissing concerns about ESG fund having a high level of stocks in common with regular diversified funds of Axis AMC, Chandresh Nigam, CEO, Axis Mutual Fund, told reporters that some overlap is natural since ESG compliant companies also tend to be rewarded by the market. Although there is some commonality, you will find differences in stocks once you go down the list of holdings in the portfolio, he added.

The foreign stocks will also bring in an element of portfolio differentiation. “This fund is for those who believe in sustainable and responsible investing," he said. The fund is benchmarked to the Nifty ESG index but it will deploy a proprietary formula to identify ESG stocks, said Ashwin Patni, Head – Products and Alternatives, Axis AMC. “We will not blindly take ESG scores from some third party. It will not be box ticking exercise," he added. Axis ESG Fund will be a multicap fund, permitted to invest across market capitalization.

However financial advisors remain skeptical. “In India, compliance with ESG parameters is mostly on paper. In reality, companies do not conform to such norms. ESG is simply not practical," said Viral Bhatt, a Mumbai-based financial advisor. Those investors who do not share this skepticism should wait and evaluate the fund and its portfolio before investing. A good track record is an essential component of fund selection.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Neil Borate
Neil heads the personal finance team at Mint. A former colleague called them 'money nerds' and that's what they are. They cover topics like mutual funds, taxation and retirement, all to improve your chances of building wealth. Neil graduated with a degree in law and economics. He passed the CFA Level I exam and began his writing career at Value Research, a mutual fund research firm in 2016. He joined the personal finance team Mint in 2019. Everyday, the Mint Money Team tackles personal finance questions such as where to invest and where to borrow, through articles, charts and reader queries. They also have a daily podcast - 'Why Not Mint Money' and an annual ranking of mutual funds - the Mint 20.
Catch all the Mutual Fund news and updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 21 Jan 2020, 09:34 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App