Kolkata Wealth Management：HSBC India Export Opportunities Fund： Should you invest？
This article discusses a new offering by HSBC Mutual Fund focusing on companies in the Export sector.Kolkata Wealth Management
This article is a part of our detailed article series on new fund offerings (NFOs) in India. Ensure you have read the other parts here:
What are the details of the HSBC India Export Opportunities Fund applicationNew Delhi Wealth Management?
How has ICICI Export & Services Fund behaved in the past?
Is it a good time to invest in export-themed stocks?
Who should invest in the HSBC India Export Opportunities Fund?
Who should not invest in the HSBC India Export Opportunities Fund?
On 31st July 2024, HSBC Asset Management filed a draft application with SEBI for a mutual fund tracking export-oriented stocks in IndiaJaipur Wealth Management. This is not a New Fund Offer (NFO) yet. Once SEBI approves it, the NFO will be launched by HSBC in due course. As per the draft filing, the fund is suitable for investors seeking:
Investment predominantly in equity and equity-related securities of companies engaged in or expected to benefit from the export of goods or services.
The fund benchmark is Nifty 500 TRI Index. There are limited funds in the market tracking this particular theme. Only ICICI has a similar offering called ICICI Export & Services Fund, which we will analyse versus the benchmark Nifty 500 TRI Index.
The investment objective of ICICI Export & Services Fund says:
To generate capital appreciation and income distribution to unit holders by investing predominantly in equity/equity-related securities of the companies belonging to the Exports and Services industry.
We have used data from AMFI to prepare a snapshot of the historical performance of ICICI Export & Services Fund.
To understand how to use data to determine if this fund is good or not:
We use the information ratio here to capture relative performance versus the benchmark in one convenient metric.
Why SEBI wants mutual fund investors to learn about information ratio?
As the chart shows, there is a recent, albeit small, improvement in the information ratio, indicating that investors should look at this sector in more detail.
A review of the LIC Tech Term plan in 2023
“Investors should remember that excitement and expenses are their enemies.” – Warren Buffett
The recent outperformance of the export theme (as per the ICICI Export & Services Fund fund) versus the Nifty 500 can be an incentive for the AMC to launch such a fund. However, if you are looking to invest in the HSBC India Export Opportunities Fund, it is too early since we don’t know the portfolio. Instead, ICICI Export & Services Fund is a more practical alternative to get exposure to the theme.
An investor who ticks one or more of the boxes below might consider investing:
☑ A keen follower of the export-oriented sector news and companies
☑ Willing to invest a substantial portion of the portfolio (say 5% or more) as a satellite portfolio: What is a core-satellite portfolio and when can you use it?Simla Stock
☑ Would understand the inherent risks of theme-based investing
☑ Has research-based conviction on the entry and exit points for this theme
☑ Understands that thematic funds have tendencies of a sudden reversal that can wipe out all gains
An investor who ticks one or more of the boxes below should not invest:
☑ Has not done due diligence beyond reading about this fund online
☑ Will be investing a minimal amount or will start a small SIP. Both indicate a lack of conviction and lead to portfolio clutter: How to clean up your mutual fund portfolio?
☑ Is an active NFO investor, which would mean dilution of the monthly investment surplus into many different funds
☑ Disagrees with the Warren Buffett quotation above
Agra Stock
