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Recent months have seen a flurry of new fund launches in the international equity category. The latest entrant is ICICI Prudential Nasdaq 100 Index Fund.
About the strategy
As the name indicates, the fund aims to closely replicate the performance of the Nasdaq 100 Index. This index tracks the performance of the 100 largest non-financial US companies listed on the Nasdaq Stock Exchange. The index is tilted towards the information-technology sector with an exposure of 44 per cent and comprises prominent tech companies like Apple, Microsoft, Facebook and Alphabet (Google).
Nasdaq 100 has turned out to be a very rewarding investment avenue over the years and a suitable avenue for Indian investors looking to diversify internationally. The index has returned an average of 23 per cent over any five-year period in the last decade.
Other funds tracking the Nasdaq 100
Motilal Oswal Mutual Fund was the first one to launch a Nasdaq 100 exchange-traded fund (ETF) way back in 2011. It has delivered over 24 per cent per annum in the last 10 years and way above around 16 per cent per annum delivered by the domestic equities (as measured by the performance of the BSE 500 TRI index). In 2018, the AMC also launched the fund-of-fund (FoF) variant of its Nasdaq 100 ETF.
More recently in February 2021, Kotak Mutual Fund launched a Nasdaq 100 FoF which invests its corpus in iShares Nasdaq 100 UCITS ETF.
But unlike the Kotak fund, the ICICI Prudential offering will not be structured as a fund-of-fund. Instead of redirecting its corpus to an offshore fund, it will endeavour to replicate the Nasdaq 100 directly. Following its launch, it will be interesting to see how well it will be able to do that and at what expenses. If the AMC's track of replicating domestic indices is anything to go by, it should hopefully be able to do a reasonably good job. Read ahead for more on this.
About the AMC
ICICI Prudential Mutual Fund ranks second in the industry, managing a total of Rs 4.71 lakh crore of investors' money. Of this, Rs 1.48 lakh crore is in 53 open-end equity funds.
The fund house has a big basket of 27 passively managed equity funds, with the AUM totalling over Rs 24,000 crore, making it the fourth-largest AMC in the realm of passive equity funds. Most of these passive funds have been launched in the last four-five years.
The expense ratio and tracking error are two competitive edges of ICICI Prudential when it comes to managing the passives. The AMC has done a decent job on both the parameters, being lower than the average of other funds tracking the same index.
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