Invest In Global Brands Beyond Tech
Motilal Oswal Asset Management Company (AMC) is all set to launch an index fund tracking the MSCI EAFE Top 100 Select Index. The new fund offer (NFO) for the scheme will run from 15 to 25 November. Being an open-ended scheme, you can also invest in it later.
EAFE stands for Europe, Australasia and the Far East. These regions in the past have been chronic underperformers. A Motilal Oswal presentation shows that this index would have given 9.3%, 11.5% and 12.2% in rupee terms over the past 3, 5 and 10 years. By comparison, the Nifty 500 delivered 19.5%, 16.6% and 15.5%. The S&P 500 of the US did even better over all three time periods in rupee terms. However, both the Indian and US indices have been richly valued after the run-up, presenting a potential valuation case for EAFE.
First, let’s dive a little deeper into the EAFE Top 100 Select Index. This index is a subset of the MSCI EAFE Index and it restricts itself to just the top 100 companies by market cap in the parent index. The number of countries it covers is also lower at 10, compared to the 21 covered by the parent index. As a result, individual stocks get higher weights in the EAFE Top 100 Select Index.
The largest five stocks in the EAFE Top 100 Select Index are Nestle, ASML Holdings (a semiconductor firm), Roche Holdings (a pharma company), LMVH Moet Henessy (a luxury goods maker) and Toyota Motor Corporation. The three largest countries covered are the UK, Japan and France, which together account for around 54% of the index.
The weight of tech stocks in the index at around 10% is a lot lower than the close to 40% weight that tech occupies in both the MSCI US and Emerging Markets indices.
The MSCI EAFE Top 100 Select Index has a low correlation with the Nifty, of just 0.42, according to a Motilal Oswal presentation. This makes it a good diversification vehicle.
In terms of valuations, the MSCI EAFE Top 100 Select Index trades at a price to earnings ratio and price to book ratio of 18 and 2.1, respectively. This is very similar to the MSCI Emerging Markets Top 100 Select Index and cheaper than the 26 and 4.8 corresponding figures for the S&P 500 Index.
However, the MSCI EAFE Top 100 Select Index is at the upper end of its own historical valuation range.
Among global passive indices, Motilal Oswal AMC already provides investors access to the US markets through its S&P 500 Index Fund and NASDAQ ETF. In addition, HDFC Mutual Fund recently launched its HDFC Developed World Indexes Fund of Funds, which feeds into various Credit Suisse Index Funds and ETFs domiciled in Ireland and Luxembourg. These index funds collectively track the MSCI World Index. However, the MSCI World Index has a roughly 68% weightage to the US, which the MSCI EAFE avoids. Investors who already have exposure to the US through another mutual fund may find more value in this offering.
“For most Indian investors, there is only space for one international fund in the portfolio and that space should go to a US fund. This is because the US is the world’s largest stock market and economy and has the world’s most innovative companies. However, sophisticated investors who are keen on a large international portfolio can look at this EAFE fund,” said Amol Joshi, founder, Plan Rupee Investment Services.
TO INVEST ONLINE Click here
Opening Date : 15/11/2021
Closing Date : 25/11/2021
ഞാന് നിക്ഷേപിക്കാന് തയാര് ഇവിടെ ക്ലിക്ക് ചെയ്യൂ
To Invest in Motilal Oswal MSCI EAFE Top 100 Select Index Fund NFO( NEW FUND OFFER ) Click Here