ICICI Prudential AMC ICICI Prudential Strategic Metals and Energy Equity Fund of Fund has launched a unique Fund of Funds (FOF) which provides exposure to global companies in gold mining and oil and gas sector.
The scheme invests in an offshore fund- First Trust Strategic Metals & Energy Equity UCITS Fund, which is managed by an American financial services firm – First Trust Advisors LP.
The underlying is an actively managed fund with a low track record as it was launched only in February 2021. Since inception, the fund has given 17.21% against its benchmark return at 12%.
NFO (New Fund Offer) for ICICI’s FOF open for subscription on January 17, 2022 and close on January 31, 2022.
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Why oil and gold?
AMC told Mint That the fund gives exposure to global gold and oil equity companies, which are otherwise not present in India. It also highlighted that the scheme aligns with ICICI’s philosophy on a change in ‘value’ strategy.
Stating that the top two imports here are oil and gold, the fund house explains that the strategy is to hedge against a possible depreciation in the rupee as a result of possible spikes in oil and gold prices.
This is reflected in the investment process, which is designed to assign portfolio weighting to both commodities based on the movement of the rupee.
As of December 2021, the fund has investments in oil and gas and gold mining companies to the extent of 69% and 31%, respectively.
What do experts say?
“The major risks to see are disruptions due to changes in demand for electric vehicles. In addition, conventional fuels such as diesel and gasoline are gradually being replaced by other low-emission fuels such as hydrogen and renewable fuels,” said Suvajit Ray, Head of Products, IIFL Securities.
But given that there is a long way to go before the transition and India continues to import oil and gold items, experts believe that high-risk investors can park a part of their portfolio.
Santosh Joseph, Founder, Germinate Investor Services LLP said, “Investing in these commodities will offset the effect of price rise (inflationary pressure) as your portfolio also goes up. And any return from depreciation of Rs.
Shriram BKR, Senior Investment Strategist, Geojit Financial Services, said, “This will only benefit those who have an understanding of sectoral funds and their cycles and who already have international exposure, but also non-technical portfolios and energy and metals. I want more.”
“Investments should be only part of a strategic allocation of no more than 10-15% of the investor’s portfolio,” Joseph concluded.
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