JPMorgan US Growth Equity Offshore Fund: Another US fund-of-fund scheme  

May 29, 2012

Schemes investing in US markets seem to be the flavour of the season and now JP Morgan, not wanting to be left behind, has joined in

Franklin Templeton MF recently launched a scheme—Franklin US Opportunities Fund and soon, Reliance Mutual Fund and DSP BlackRock Mutual Fund followed suit and filed offer documents to launch Reliance US Dollar Fund and DSP BlackRock US Flexible Equity Fund respectively. JP Morgan which has launched three offshore equity funds in the past, recently, filed an offer document with the Securities and Exchange Board of India (SEBI) to launch another fund-of-fund (FoF)— US Growth Equity Offshore Fund. The other FoF schemes are: JPMorgan JF ASEAN Equity Off-shore Fund, JPMorgan JF Greater China Equity Off-shore Fund and JPMorgan Emerging Europe Middle East and Africa Equity Off shore Fund. JP Morgan is probably looking to give investors a varied option of offshore funds to invest in and competition to DSP BlackRock MF, another fund house, which has a wide array of foreign funds. The asset management company filed a couple of offer documents last year to launch JP Morgan America Large Cap Equity Offshore Fund and JP Morgan Global Financial Equity Offshore Fund, these schemes, however, are yet to be launched.

According to the offer document, JPMorgan US Growth Equity Offshore Fund, will invest 95% to 100% of its assets in JPMorgan Funds—US Growth Fund. The rest would be kept in money market instruments, liquid schemes, cash and cash equivalents. The foreign fund which was launched in October 2000 has an objective to invest  in companies  that  have  the ability  to  deliver  significantly  higher  growth  than  market   expectations  over  the  next  three to five  years. At least 67% of the assets of the underlying scheme will be invested in a growth style based portfolio of equity securities of companies that are domiciled in US or carrying out the main part of their economic activity in the US. The underlying scheme may also invest in Canadian companies. The scheme performance will be benchmarked to the INR equivalent Russell 1000 Growth Index (Total Return Net).

The underlying scheme, priced in US dollars, has returned 17.25% year-to-date, as on 30 April 2012. The benchmark returned 14.36% and the Sensex returned 5.86% in the same period. However, in the last three-year, five-year and 10-year period where it returned, 20.45%, 0.72%, and 2.18% respectively, it failed to outperform the benchmark which returned 20.85%, 3.61% and 4.73% in the respective periods. The top holdings of the fund are: Apple, Mastercard, Biogen Idec, IBM and Intuitive Surgical. More than half of the assets of the fund are invested in the technology and consumer products sectors.

This being a FoF scheme you will not get any long-term tax benefit you would have got had you invested in any domestic equity scheme. A better option for the investors would be to rely on a systematic investment plan (SIP). Which scheme to choose? A good equity diversified scheme would do the trick. Namdev Chougule will be the fund manager of the scheme.

Additional Scheme Details

Minimum Investment amount: Rs5,000 and in multiple of Re1 thereof
Additional Investment amount: Rs1,000 and in multiple of Re1 thereof

Annual scheme recurring expenses: 1.650% p.a. of average daily net assets
Exit load if switched before one year: 1%, and nil after one year
Taxation: Investors would be subject to long-term and short-term tax on capital gains.