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Mirae Asset Mutual Fund has announced the launch of two FANG+ funds, its first foray into international funds.

The fund house is launching an exchange-traded fund (ETF) tracking the NYSE FANG+ Index in the US as well as a Fund of Funds (FoF) tracking the same index.

The FoF will invest in the ETF and make it possible for investors without demat and trading accounts to invest.

The new fund offer will run from 19 April to 3 May. Being open-ended in structure, the funds can be purchased and sold thereafter as well.

The FANG+ Index is composed of 10 equally weighted technology stocks—Facebook, Apple, Amazon, Netflix, Alphabet, Alibaba, Baidu, Nvidia, Tesla and Twitter.

The FANG+ Index outperforms many of its peer indices and is one of the most highly correlated indices to technology and related stocks.

Its underlying composition is equally weighted across all stocks, allowing for a more diversified and represented portfolio.

STELLAR RETURNS

A presentation by Mirae Asset shows that the index has delivered a return of 46.8% compound annual growth rate (CAGR) over the past five years in rupee terms.

In other words, a rupee invested in the index would have multiplied almost seven times in five years.

This outpaces the 28.1% returns delivered by the Nasdaq 100 Index and the 17.3% returns given by the Nifty 50 (as of 26 February).

“These stocks have rallied strongly in the recent past, which has been supported by strong earnings and their expected earnings growth is also high. The ETF will have an expense ratio of just 0.33%, while the FoF will have an expense ratio of 0.5% on the direct plan and 1% on the regular plan, inclusive of the underlying ETF charges. The ETF will be investing in these stocks directly," said Siddharth Srivastava, head of ETF products, Mirae Asset Global Investments.

GOOD OPPORTUNITY

According to Chetan Gill, a Chandigarh-based mutual fund distributor, “This is an opportunity for Indian investors to invest in the world’s greatest innovators—companies like Apple, Google, Tesla, Facebook, Netflix, etc."

“These 10 companies have a market cap of $7.7 trillion—nearly three times the Indian market; and revenues of $1.09 trillion—3x of the Indian government’s total receipts," he said.

“The index returns have been phenomenal—eight times in the past six years as compared to four times for Nasdaq and two times for S&P 500. But investors must note that this is a concentrated portfolio and is a higher risk proposition for investors who are willing to take that risk," he added.

International ETFs and FoFs are taxed as debt funds in India. This means taxation at slab rates for holding periods below three years and at 20% with indexation for longer holding periods on capital gains in them.

“This is a high-risk offering, more suited to high net-worth and sophisticated investors. It does, however, offer a low-cost convenient access to the US tech stocks as opposed to opening a US brokerage account via the Reserve Bank of India’s Liberalized Remittance Scheme," said Amol Joshi, founder, Plan Rupee Investment Services.

SIMILAR OFFERINGS

Other mutual funds in this space include the Motilal Oswal Nasdaq 100 ETF and FoF.

The Motilal Oswal Nasdaq ETF completed 10 years last month, delivering a CAGR of 24.98% since launch.

Edelweiss Asset Management launched a US Technology Equity Fund of Fund in March 2020, which is up 73.81% since inception.

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