Mirae Asset China Advantage Fund

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Launching its third equity and second overseas fund, Mirae Asset (India) now goes to China. Objective: This feeder fund is an open-ended equity fund of fund (FOF) scheme that will predominantly invest in units of Mirae Asset China Sector Leader Equity Fund (master fund) and/or units of other mutual fund schemes, units of exchange-traded schemes that invests in equities and equity-related securities of companies domiciled in or having their area of primary activity in China and Hong Kong.

Strategy: The master fund is a sub-fund of Mirae Asset Global Discovery Fund and it operates under an umbrella fund structure. The master fund invests in 30-35 stocks primarily in the large-cap space. In July 2009, the top two sectors of the master fund viz. financials and energy contributed almost 66 per cent of the assets. It seems like the portfolio strategy is to take concentrated sectoral and stock calls. However, it results in a slightly higher portfolio risk.

Fund Manager & AMC Performance Gopal Agrawal and Neelesh Surana will together manage the feeder fund, while the master fund is managed by Byung Ha Kim. As on August 2009, Mirae Asset India currently handles a corpus of Rs 252.34 crore in both equity and debt schemes. Out of the two equity funds, one has managed to beat the category returns over one year.

Suitability & Recommendation: The master fund on YTD basis (till August 31) yielded returns of 46.1 per cent, while the BSE Sensex index rose by over 61 per cent and average domestic diversified funds category gave returns of over 58 per cent. In the last five years, the Indian (BSE Sensex) and Chinese (Shanghai index) markets have shown strong correlation and have moved almost in tandem as both are affected by the same trend in risk aversion and capital inflows. Thus this fund might not serve the purpose of diversification as in the case of other overseas funds. While China and India are both growth markets, yet China’s story is largely linked to the uncertain global recovery whereas India’s growth story is primarily supported by strong domestic consumption. Llike other overseas fund, it would also carry a currency risk. One can look at the fund purely to de-risk from the Indian market and should only take limited exposure and not expect ecstatic returns in the short-run.