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JP Morgan Initiates Off-Shore NFO

The NFO gives investors a chance to tie their fortunes to those of ‘Greater China’

Yet another asset management company (AMC) has opened up a route to foreign lands. As has been the pattern for fund companies with foreign origins, JP Morgan’s Greater China Off-Shore Fund is also a feeder fund for a pre-existing fund. The local fund’s assets will flow into the JF Greater China Equity Fund that is being run by the AMC’s foreign parent.

For the Indian investor, the fund is an easy route to invest into a set of very dynamic economies that have shown great resilience during the global economic crisis. ‘Greater China’, in this context, means China, Taiwan, and Hong Kong, the three economies that have a high degree of economic integration.

The fund will be investing more than 80 per cent of its assets in the underlying fund and can keep up to 20 per cent of its assets in cash equivalents.

The Underlying Scheme

The JF Greater China Equity Fund was launched in May 2001 and is managed by Howard Wang and Emerson Yip. Wang, who holds a B.A. degree, is the managing director and has been with JFIMI since 2005. He heads the Greater China team and has also worked with Goldman Sachs as MD – Equities. Yip holds a B.S. degree and began his career as an analyst with Morgan Stanley in 1994. He joined JFIMI in 2006. He had earlier worked with Newbridge Capital in Hong Kong, Singapore and San Francisco offices where he was responsible for private equity.

Suitability and Recommendation

The developing economies are expected to recover from the recession faster than the developed world. They are also more likely to clock higher gross domestic product (GDP) growth rates. Hence, investing in companies functioning in these countries presents a strong case for investors.

China is the largest of the emerging economies. With a current account surplus and low government debt, its finances are looking strong. With the government intent on reducing reliance on exports, the prospects of a faster recovery and stability will be better. The economies of Hong Kong and Taiwan are also fast being integrated with that of China, and the companies there will have better opportunities for logging growth.

However, investments in this fund will be subject to currency exchange risk. The fund aims to maximize returns in dollar values. When the Chinese Yuan becomes stronger against the USD, the returns in dollar terms will be higher. But if the rupee also appreciates against the dollar, the opposite will happen, negating the effect. On the taxation side, investments in equity FoFs are taxed as per debt fund rules, loosing out against domestic equity funds where the gains after one year are tax free.

Basic Details

Type: Open-End Equity Fund of Funds (FoF)

NFO Opens: July 09, 2009

NFO Closes: July 31, 2009

Plan / Options: Growth option only.

Minimum Application Amount: Rs. 10,000/-

Minimum Additional Purchase / Redemption: Rs 1,000/-

SIP Facility: Minimum 6 cheques of Rs. 1,000/- each. Available on monthly / quarterly / yearly basis.

Benchmark: MSCI Golden Dragon Index (Total Return Net)

Fund Manager: Namdev Chougule

Load Structure (During NFO): Entry Load: For investments of less than Rs 5 crore, 2.25 per cent.
Exit Load: 1 per cent for redemptions / switch-outs before 6 months; For SIP, 1 per cent for redemptions / switch-outs between within 24 months.

Annual Recurring Expense (maximum): 0.75 per cent (including Investment Management fee of 0.30 per cent).