And now, an Indo Asia fund

ICICI Pru takes the AMC flair for nomenclature a bit too far with its latest offering

MUMBAI: Is it Indonesia spelt wrongly? Has the US Department of State added one more to its list of strangely named regions like Near-East (there is no Far-East) and South and Central Asia (there is no North)? Then, what does ICICI Prudential Indo Asia Equity Fund, the latest offering from the fund house, propose to do?

Going by the company, its latest fund offering would be an open-ended equity diversified scheme that will invest 65% or more of its corpus directly in Indian equities across market capitalisation and the rest in Asian Equity Fund, an open-ended equity fund managed by Prudential Asset Management, Singapore, predominantly investing in equity markets across the Asia-Pacific region.

But, isn't India a part of Asia, too?

As such, the Asia Equity Fund that the Indian fund will invest in, doesn't have a very long track record. But, even the short track record doesn't look impressive. The fund, whose institutional version was launched in 2003 and the retail portion only in 2005, has a corpus of $590 million. The fund's allocation is mainly to three countries - Korea (22.6%), Hong Kong (21%) and Taiwan (19.9%). Samsung Electronics is the top holding with an allocation of 4.8% of the portfolio. As per the fund manager's presentation at its launch, the scheme had not been able to beat its benchmark MSCI AC Far East Free ex Japan index in the one-year period ending June 29.

Given this, the potential upside on the Indian fund's investment in the Asia Equity Fund appears limited.

Here's what could have forced chief investment officer Nilesh Shah and his team to make this geo-strategic discovery.

1. This is the global funds season and fund houses are running out of names. In the last couple of months, at least four fund houses have launched global schemes with names like Global Advantage, Emerging Markets, World and Offshore. So, here's one named after Asia.

2. And why the Indo prefix? According to a tax rule, for a scheme to be treated as an equity mutual fund and taxed accordingly, it should invest not less than 65% of its corpus in Indian equities and equity related securities. Hence the decision to restrict diversification to mere 35% of the corpus.

3. Fund houses launching global products only have as many choices as their overseas partner can offer. For example, DSPML had to choose from the Merill Lynch's array of funds, just as ICICI Pru has gone for Prudential's. By the way, Prudential has some interestingly named funds - like the Dragon Peacock Fund, which predictably invests in the hottest growing economies, China and India! For some reason, though, the managers have decided to go for a sub-fund of the foreign partner's International Opportunities Fund.

The bottomline is the same as in case of the other "global" products we have discussed - only investors who have enough exposure to local investment avenues should consider this fund. Even for such investors, though, this fund does not spell much geographical diversification - it will invest only in Asia, but Japanese companies are out of bounds.