The arrangement will allow individual investors from India to invest in offshore funds through the ICICI Prudential Mutual Fund feeder.
India’s largest fund house manages about Rs 4.7 lakh crore ($63.71 billion) of assets in the local market. First Trust is an international provider of enhanced index and actively managed ETFs. It also manages about $147 billion of assets.
“This partnership brings together two investment managers that can leverage on their strengths of investment expertise to provide the best value to their respective investors,” said Shamit Chokshi, head of international business at ICICI Prudential AMC.
“Through this tie-up, we aim to bring many of First Trust’s innovative active and exchange-listed offerings to Indian investors, as part of our plan to offer several portfolios focused on international and thematic investing,” he said.
The launch of ICICI Prudential Strategic Metal & Energy Fund of Fund is a case in point. The plan would invest in the First Trust Strategic Metal and Energy Equity UCITS Fund. The First Trust fund seeks to deliver long-term capital appreciation through investment in a diversified portfolio of global equity securities related to gold and oil.
These securities will be listed or traded on regulated markets worldwide.
The strategy is billed as an effective hedge against potential declines in the Indian rupee and the economy whenever oil and gold prices go up.
A fund manager will consider correlation and momentum factors to allocate funds across stocks in the two sectors in a band of 30%-70%.
For gold stocks, it will limit the fund to companies that are traded and incorporated in G7 countries primarily. The oil portfolio largely will likely stick to US and Canadian companies.
“The goal in both the gold and oil portfolio is to endeavour that they have a broad representation of the oil and gold producing companies,” said Chokshi.
The partnership will allow Indian investors to diversify their portfolios, according to Eric Anderson, senior vice president and head of international business at First Trust Advisors. “We look forward to partnering and launching more such innovative fund strategies in India in the near future,” he said.
ETF investment is generally passive as a fund manager tracks an index to generate returns on investments.
Passive ETFs try to replicate the performance of a predefined index, net of fees and expenses. But active ETFs aim to beat the benchmark it tracks, by actively managing the portfolio in selecting securities, deciding up on index weights and taking sector calls. In the US, they are tax-efficient as well.
Passive ETFs would buy-and-hold as per the particular tracking index. Active ETFs would pursue a specific strategy to outperform a benchmark but can be less transparent to passive ETFs though there are portfolio disclosures.
