Investors should hunt for a truly diversified global equity fund

WHAT IS IT: ICICI Prudential Global Stable Equity Fund (IPGSEF) is an open-ended global equity fund of fund (FoF) aiming to deploy your money in subscription of units of Luxembourg-registered Nordea 1-Global Stable Equity Fund-Unhedged (N1GSEFU), managed by Nordea Group, a pan-European banking entity based in Luxembourg and Switzerland. For ICICI Prudential Asset Management, IPGSEF is its second offering in the global fund category; the first one being its US Bluechip Equity Fund launched in June last year.

NFO PERIOD: August 27 to September 10. Minimum application amount is Rs 5,000.

ASSET ALLOCATION: Between 95 and 100 per cent of the fund's corpus will be invested in units of N1GSEFU and potentially in units of other overseas mutual fund schemes. The fund manager may keep up to 5 per cent in domestic money market securities or cash.

SCHEME OBJECTIVE: The stated objective of IPGSEF is to provide adequate re turns by investing in units of overseas mutual fund schemes that have the mandate to invest globally.

BENCHMARK: The fund will be benchmarked to MSCI World­Net Return Index, although the un derlying fund in which it will invest, N1GSEFU, does not benchmark its does not benchmark its performance to any index.

Big players in the domestic mutual fund industry have a tendency to exploit investors' rapidly changing sentiments during volatile domestic equity market. New and old global fund schemes are being sold aggressively due to poor performance of domestic equity market over the past couple of years. The words `global stable' in the name of IPGSEF is tempting since it gives an impression of wide diversification across the globe.

But look at the percentages of N1GSEFU's corpus deployed country-wise in July -55.4 in the US, 9.2 in Japan, 8.2 in the UK, 5.9 in France, 4.2 in Switzerland, 4.0 in Canada, 3.1 in Spain and 2.1 in Israel. These eight countries alone gobble up 92.1 per cent and all of them are developed countries. N1GSEFU does not have a long-term track record; it was launched a just over three years ago. Its returns have been volatile during this time despite the name having the word `stable' in it.

When 2011 ended, and annual performance gauged, N1GSEFU was the top performer among Noreea's 17 equity funds having varying themes of region, country and global. But when 2012 ended, it was the secondworst performing fund among 23 Nordeau equity funds.

Investors should hunt for a truly diversified global equity fund that invests in a widely diversified mix of developing and developed markets.