Mirae Asset Equity Allocator Fund of Fund Review: Anything Special?

Published: September 10, 2020 at 11:13 am

Mirae Asset Equity Allocator Fund of Fund is an open-ended fund of fund scheme predominantly investing in units of domestic large cap and mid cap equity ETFs (95% or more) thereby making it an “equity-oriented fund” with respect to taxation. In this review, we ask if there is anything special about this new fund offering.

The equity allocator fund of fund (FOF) will choose Indian equity ETFs predominantly from the large cap and/or midcap equity segment. Hence the benchmark is NIFTY 200 Index (TRI). According to the scheme document, “The selection of stocks for the portfolio of underlying ETFs may be based on market cap range, sector, theme, strategy etc. or a combination of one or more of these styles”.

They can also invest in their own ETFs or from other AMCs. This essentially means full freedom to invest as they please will little clarity as to how. The marketing material has this vague statement about how the FOF will act as an “allocator”: “Allocation between market segment (Nifty 50, Nifty Next 50 and Midcap ETFs) based on
valuation attractiveness”. A statement, as is usual across AMCs, missing from the scheme document.

In short, we do not know how Mirae Asset Equity Allocator Fund of Fund will allocate between large and mid cap ETFs. We do not know* when it will change allocation and we do not know what ETFs the fund will invest in. * This means nothing is mentioned in legally binding documents like the key information memorandum (KIM) or scheme information document (SID). The AMC may have sent additional “promotional” material to media outlets. Freefincal has no interest or access to such material.

The AMCs wants investors to put their money in this because they assume “investing in ETFs without a demat account” is a great benefit. Mirae asset claims this is a low-cost way to get “nominal alpha in the long run”. Investors are better off with a simple Nifty 50 and Nifty Next 50 index fund combination to capture both the large and midcap segments at even lower cost: Combine Nifty & Nifty Next 50 funds to create large, mid cap index portfolios

How is this different from ICICI Prudential Asset Allocator Fund (review link)? The ICICI fund is a hybrid fund of fund that can swing from 100% to 0% equity. Mirae Asset Equity Allocator Fund of Fund is an equity fund. Only the market cap and sector of the stocks can freely vary.

Mirae Asset Equity Allocator Fund of Fund: Should You Invest?

Is there anything special about this new fund offer? Not enough is know about it to say yes or no! The AMC already has enough offerings in large and midcap space (click on each fund to see review): Mirae Asset Focused FundMirae Emerging Bluechip FundMirae Asset Tax Saver Fund and even their Mirae Asset Hybrid Equity Fund and Mirae Asset Large Cap Fund have a dash of midcaps.

So there is no need for this “equity allocator” in their own stable other than to get a quick AUM fix. There is definitely no need for it in any investors portfolio. Investors can safely and happily give this fund a grand miss.

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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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