ICICI Pru Mutual Fund has just launched its ICICI Pru MNC Fund. The NFO is open from May 28 to June 11, 2019. Should you invest?
What is an MNC?
MNC stands for multi national corporation. If you thought it refers to only foreign brand companies such as Hindustan Unilever, Nestle, Colgate and you cannot be more wrong. Even India has home grown MNCs. Tata companies, Birla companies, Mahindra companies, Maruti, Airtel, etc. have businesses in several other nations of the world.
The word MNC has a sort of aura around it. Most people want a job with an MNC, buy MNC products and some even want to buy MNC shares. Surprisingly, not many in the investment industry have milked this aspect of our thinking.
There are 2 known funds with the theme. One is UTI MNC Fund and the other is Aditya Birla SL MNC Fund. And now, we have ICICI Pru MNC Fund.
What is the ICICI Pru MNC fund all about?
ICICI Pru has created a detailed presentation on the MNC fund offering. Click here to view. Hence, I will spare you the details.
In my understanding, the fund will invest predominantly in companies which have business operations in more than one country. This includes foreign companies in India as well as Indian companies having foreign operations.
MNCs, historically, have tended to represent high quality. In most cases, as a group, they have delivered better returns for the shareholders. They are also present across the spectrum of market cap as well as sectors.
So, does this fund deserve your money?
The key difference of this fund though (from the other two) is that it can invest in MNCs listed outside India too. Think Alphabet (Google), Amazon, etc.
Questions: Is quality restricted to an MNC stock? Are there no opportunities outside of it? Why would a fund restrict its mandate to just MNC?
I also wonder why would ICICI Pru not do a smart rules based system for this fund to reduce the expense ratio dramatically. DSP Quant fund just did that.
More to it than meets the eye
ICICI Pru is on the top list not just in terms of AUM but also in terms of the number of schemes it offers. Yet, they keep launching fund after fund. Now, there’s one more. I don’t see any reason but to appease some distribution channels as the key reason for the launch of the fund.
I suggest, AVOID this new fund offer. Any good multi cap fund will build a quality portfolio, MNC or no MNC.
In fact, we have an existing alternative fund with a similar mandate, which you read about here.