Axis Global Equity Alpha Fund of Fund Review: Should You Invest?

Published: September 6, 2020 at 12:00 pm

Axis Global Equity Alpha Fund of Fund is a new offering from Axis AMC. It will invest in Schroder International Selection Fund Global Equity Alpha, a large cap oriented global equity fund. We discuss the performance of this underlying fund to understand if it makes sense to consider the Axis fund for “international diversification”.

Readers may recall from our previous reviews of Franklin India Feeder – Franklin U.S. Opportunities Fund and ICICI Prudential US Bluechip Equity Fund that active fund management of US stocks (directly like the ICICI fund or via a fund-of-fund like Franklin) has not been productive in terms of “beating the index”.  Expenses play a big part in this.

Therefore, even before we begin considering Axis Global Equity Alpha Fund of Fund, the underlying fund should (after expenses) first consistently outperform its benchmark. The direct plan of the Axis fund should have an expense ratio of about 0.5%. The regular plan expense ratio would be about 1.5% higher as the AMC via its distribution channels (foremost Axis bank) would aggressively push the fund particularly during the NFO period (Sep 4-18th 2020). An AMC with bank support can easily aim for Rs. 1000 crores from an NFO. Therefore investors need to be wary.

About Schroder ISF Global Equity Alpha.  Axis Global Equity Alpha Fund of Fund would invest in this fund managed by Schroders, an AMC domiciled in Luxembourg. According to Morningstar UK, can invest across the globe in companies which the fund manager believes “will deliver future earnings growth above the level expected by the market typically on a 3-5 year horizon”.

According to the scheme information document of Axis Global Equity Alpha FOF, shareclass C of SISF Global Equity Alpha has a current expense ratio of 0.84% with an AUM of 1715.07 Billion USD. The fund launched in July 2005 is benchmarked to MSCI World NR USD. This index consists of large and midcap stocks in 23 developed countries.

These are the top five regions

  1. The United States 66.35%
  2. Eurozone 13.73%
  3. Europe – ex Euro 7.54%
  4. The United Kingdom 5.15%
  5. Asia – Emerging 4.48%

The top ten holdings of Schroder ISF Global Equity Alpha is dominated by the “usual suspects”.

  1. Microsoft Corp 4.76%
  2. Alphabet Inc 4.65%
  3. Visa Inc 4.47%
  4. Inc 4.33%
  5. Adobe Inc 3.95%
  6. Facebook Inc 3.43%
  7. UnitedHealth Group Inc 2.87%
  8. Danone SA 2.47%
  9. JPMorgan Chase & Co 2.42%
  10. Intuit Inc 2.39%

We plot below the five and ten year rolling returns for ISF Global Equity Alpha USD with MSCI World Index (USD) Net Return and S and P 500 TRI in USD.

5-year rolling returns of Schroder ISF Global Equity Alpha USD with MSCI World Index (USD) Net Return and S and P 500 TRI in USD
5-year rolling returns of Schroder ISF Global Equity Alpha USD with MSCI World Index (USD) Net Return and S and P 500 TRI in USD
10-year rolling returns of Schroder ISF Global Equity Alpha USD with MSCI World Index (USD) Net Return and S and P 500 TRI in USD
10-year rolling returns of Schroder ISF Global Equity Alpha USD with MSCI World Index (USD) Net Return and S and P 500 TRI in USD

Axis Global Equity Alpha Fund of Fund: Should You Invest?

Notice that the underlying fund, Schroder ISF Global Equity Alpha, has a poor track record with respect to its index. MSCI World. Considering that investors are likely to pay another 0.5% (in the direct plan) and significantly more in the regular plan when they invest via the Axis fund, they should avoid Axis Global Equity Alpha Fund of Fund.

As a fund investing in global equity (with a US tilt), a comparison with S&P 500 is technically incorrect, especially with the unrealistic uptick in the US market. That said,  based on currently available choices, an Indian investor looking for “some international diversification” is better off with Motilal Oswal S&P 500 Index Fund considering the lower expenses. However, they must be aware of the risks. See: Motilal Oswal S&P 500 Index Fund: What return can I expect from this?

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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