Fund of Fortnight

This is our mutual fund recommendation. Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.

Reason for recommendation
There are many changes happening in China such as the relaxation of its policy on the virus, extending assistance to real estate companies and drafting policies to boost the economic environment. This makes China an attractive investment destination, especially after looking at its underperformance and reasonable valuation. Edelweiss Greater China Equity Off-Shore Fund is one such fund that investors can look at to park their funds. This fund is an overseas fund of funds (FoF) that invests in a foreign mutual fund, namely, JP Morgan Funds – JF Greater China Fund. In terms of returns, except for the calendar year 2018 and 2021, this fund has never generated negative returns from 2014 to 2021. However, if we take a look more recent data of the past few weeks, this fund has performed exponentially well and has outperformed most of the emerging markets. The top three sectors contribute 62.95 per cent while the top 10 sectors contribute 40.32 per cent of the overall assets. On the sectoral front, this fund is overweight on technology but is underweight on consumer cyclical, financial services and communication services. Looking at its portfolio, this fund invests in stocks like Taiwan Semiconductor Manufacturing Co Ltd., Tencent Holdings Ltd., AIA Group Ltd., Alibaba Group Holding Ltd., and so on. 

Looking at the risk aspect of the fund, it indeed scores high on the risk front. Firstly, this fund is concentrated in terms of region. So, it only invests in Chinese companies. Secondly, this fund holds higher beta and standard deviation among the category. Finally, as it is an international fund, apart from country specific risk this fund also carries currency risk. Therefore, you should assess your risk appetite before investing in this fund. However, this fund is recommended purely from tactical purpose and hence should not be linked to any of your financial goals. Moreover, this fund is more suitable for superaggressive investors.