Mumbai: Edelweiss AMC is all set to launch a mutual fund scheme focused on technology companies listed in the USA. The Edelweiss US Technology Fund will feed into the JP Morgan US Technology Fund. The New Fund Offer (NFO) of Edelweiss US Technology Fund is set to open on 14 Feb and close on 28 Feb. Since it is an open ended fund, it will be available for subscription thereafter as well. The JP Morgan fund has delivered a CAGR of 19.21% over the past 5 years, in US dollar terms in sync with a powerful rally in US tech stocks.
In its presentation, Edelweiss AMC argued that investors should participate in the big trends of tomorrow such as Artificial Intelligence (AI), Cloud Computing, Over the top (OTT) Streaming, Autonomous Cars and 5G networks. These trends have not yet fully matured and hence this would be the right time to latch on to them. “JP Morgan US Technology Fund is an actively managed fund which invests in technology companies that are in early stage of adoption and are growing at a fast pace compared to technology that are matured in their growth cycle. Moreover the fund has a multicap strategy and shall outperform popular largecap biased indices in the long run," said Radhika Gupta, CEO, Edelweiss Asset Management Company.
The JP Morgan Fund has Synopsys Inc, Advanced Micro Devices (AMD) and Microsoft as its top 3 holdings. “Some tech companies have definitely seen a good run in the last couple of year as adoption of their products has seen a massive increase. However the underlying product (JP Morgan US Technology Fund) is underweight on such stocks.
The fund has an overweight stance on stocks that have their product adoption in early and mid stages and have not matured yet," Gupta added. However she cautioned investors against making lump sum bets. “Valuations are above average and we would suggest a staggered approach to invest in this fund at the moment," said Gupta.
At present Indian investors can invest in US tech stocks through the Motilal Oswal Nasdaq ETF (or its feeder fund, the Motilal Oswal Nasdaq FoF). It’s 5-year return in Indian Rupee (INR) terms stands at 20.15% (CAGR). However, this fund is a passive instrument tracking the NASDAQ Index. Alternatively investors can choose a broader US oriented fund like the Franklin India Feeder Franklin US Opportunities Fund, but such funds would have a more diversified approach than a thematic fund such as the Edelweiss US Technology Fund.
International Funds report their NAV in rupees and can be bought and sold like any ordinary mutual fund in India. Investing in them is not treated as a remittance under the Liberalised Remittance Scheme (LRS) and hence would not be subject to the 5% Tax Collected at Source (TCS) in the investor’s hands. Gains in international funds would be taxed in the same manner as debt funds. They would be taxed at slab rate if held for less than 3 years and at 20% with indexation if held for longer.
“This is a unique product. No other actively managed fund is focused on US based next gen technology stocks. I would recommend it to clients," said Vinit Iyer, a Pune-based SEBI registered investment advisor (RIA). Edelweiss US Technology Fund will give global diversification, a feature that is sorely missing in the portfolio of the average Indian investor. However, it is exposed to a single foreign country and a single theme, which makes it a high risk product. Investors should wait for a fund to establish a track record before investing. However in this case, the underlying JP Morgan Fund does have a 10 year track record. If you do want to invest in the fund, try to stagger your investment through a Systematic Investment Plan (SIP).