In its first foray into the international mutual funds’ space, HDFC Mutual Fund will shortly be launching a Fund of Funds (FoF), which will mirror the MSCI World Index. Notably, the MSCI World Index, with more than 1500 constituents, focuses on capturing large and mid-cap representation across 23 developed markets, while covering about 85% of the free float-adjusted market capitalization in each country.
The new fund offer (NFO) for this open-ended scheme will run between 17 September-1 October, with an option for purchase and redemption available thereafter. The objective, as stated in the fund presentation, is to provide long-term capital appreciation.
HDFC Developed World Indexes Fund of FundThe minimum purchase amount during the NFO is set at Rs. 5,000, with an additional purchase priced at Rs 1,000 and any amount thereafter. The fund follows a 3T (Tax, Timing, and Transaction costs) for optimal fund performance.The fund, which will also purportedly provide a hedge against currency depreciation, will track multiple Index and ETFs across the constituent countries to provide for diversification and balance in the portfolio. Here is a snapshot of the fund’s breakdown amongst various categories of its investments in Credit Suisse Index Funds (CSIF).
|Name of Fund||Allocation (In percent)||Benchmark Index||Number of Constituents||Market Capitalization (in billion dollars)|
|USA Blue UCITS (ETF)||67.6||MSCI USA||625||39,847|
|(Lux) Equity Europe||19.1||MSCI Europe||432||11,139|
|(Lux) Equity Japan||6.6||MSCI Japan||272||3,879|
|CSIF (Lux) Equity Canada||3.3||MSCI Canada||91||1,927|
(Lux) Equity Pacific
|3.3||MSCI Pacific ex Japan||127||1,963|
About the MSCI World Index
Covering 14 currencies, around 56 percent of the global GDP, and almost 50 percent of the total global market capitalization, the MSCI World Index is one of the most popular indices to track economic activity in the developed countries.
Per estimates, by 2026, the GDP growth of countries forming part of this index will touch almost 64.3 trillion dollars. With around 22.5 percent weightage to the IT sector, followed by financial (13.3 percent), healthcare (12.8 percent), and consumer staples (7.01 percent), the index has its highest regional exposure in the United States (68 percent), preceded by Europe (19 percent) and Japan (7 percent).
The fund narrows down developed markets on the basis of the following factors, namely economic development, size and liquidity requirements, and market accessibility. Take a look at some of the comprehensive valuation indicators that are comparable between Nifty and the MSCI Index
|Valuation Parameter||MSCI World Index||Nifty50 Index|
|ROE (Return on Equity)||13.55||13.39|
Per the presentation, data also suggested that the MSCI Index has registered lower volatility than Nifty 50 across various time frames, in addition to slightly higher 2021 YTD returns, which stood at 15.1 percent for MSCI World Index and 11.7 percent for Nifty. Over the past five years, the MSCI World in dollar terms delivered 14.3% compared with 11.8% on the Nifty 50.