HDFC Mutual Fund files Draft Scheme Information Document (SID) for MSCI Emerging Markets Index Fund of Funds. It comes under the category of Foreign Fund of Funds. The scheme is an open-ended fund of the scheme of funds investing in units/shares of foreign index funds and/or ETFs that track the MSCI Emerging Markets Index.
The scheme will be benchmarked against the MSCI Emerging Markets Index (Net Total Return Index).
EM countries include – Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates.
The MSCI Emerging Markets Index captures large and midcap representation across 27 Emerging Markets (EM) countries. According to SID, with 1,418 components, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
The index is rebalanced on a quarterly basis and may be rebalanced at other times as well.
The minimum application amount during the NFO period and post which is 5,000 for additional purchases after re-opening of the scheme, the minimum application amount is 1,000.
Note, investing in emerging markets can be more risky than investing in developed markets.
Also, since the underlying schemes will invest in securities that are denominated in foreign currencies, fluctuations in the exchange rates of these foreign currencies may have an impact on the earnings and value of the underlying scheme(s). Thus, returns to investors are the result of a combination of returns from investments and fluctuations in exchange rates.
The fund will be managed by Krishna Kumar Daga.
In terms of taxation, sale of units will be treated as capital gain. In case of long-term gains – where the holding period exceeds 36 months – the gains will be taxed at 20 per cent along with indexation gains. On the other hand, short-term gains will be taxed at the applicable slab rate for the unitholder.
On the outlook front, Sandeep Bhardwaj, CEO, Retail, IIFL Securities said, “The share of emerging markets in the global economy has increased significantly. They will continue to grow at a faster rate due to higher demand, demographics and sustained growth on a lower base. Backed by digital transformation.”
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