Jun 19, 2012, 05.07 PM IST
S Naren, chief investment officer - equity, ICICI Prudential MF explains to CNBC-TV18 that the launch of the fund was motivated by the global demand for uncorrelated equity products which offer benefits of diversification.
The fund, Naren adds, focuses on American companies that are strong in brand and leaders in technology as they are most suited to avail the benefits of uncorrelated equity products.
Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: There are reports that you are going ahead to collect money for investment in equities. Will the fund invest only in US equities?
A: Yes, it will invest in all the stocks which are listed in US stock exchanges like the NYSE and NASDAQ.
Q: What was the motivation for the launch of such a fund? Why did you not launch a fund for investment in India?
A: We already have a complete suite of products for India with almost 15 strategies to tap equity and numerous strategies to tap debt. We felt we needed to tap the international market with uncorrelated equity products because our experience in 2008 showed that correlated equity products do not offer the benefits of diversification which is why only the gold funds collected a lot of assets in 2008.
As far as uncorrelated asset classes are concerned, American companies are strong because of their brands and leadership in technology and hence are the most suitable to avail of the benefits of uncorrelated products.
Q: Could you explain for investors and organisations planning to enter the US, what are the risks related to currency?
A: Currency can be both a risk and a benefit. Our belief is that American companies have competitive advantages that are not related to the currency.
Of course, we will not be hedging the currency, but at the same time we believe that we are actually investing in a market which provides the leadership in technology and brand for the entire world. So, to worry only about currency is not correct.
Q: But what's your expertise in choosing the best US companies? Will it be done by your fund managers in India? What is the mechanism and what are the SEBI or government of India rules on caps?
A: Yes, there is a USD 300-million fund limit for which we have as a mutual fund. There is no specific permission that any investor needs to take for investing in this fund as it is part of the USD 300 million cap for ICICI Mutual Fund and no individual permissions are required.
To choose companies in the US, we have tied up with Morningstar to research over 1,200 companies and help identify companies which have either competitive advantages due to brand, network or leadership in technology.
We also have research support from other American broking firms operating in India. We hope to create portfolio which we believe will focus on the strengths of American companies.
Q: Do you plan to launch a set of products possibly an ETF for US equities or other foreign equities?
A: We were faced with problems regarding concerns on growth and leverage in the consumer space. So we intended to create an uncorrelated product.
Video of the day
Dec 6 2013, 15:02
- in MARKET OUTLOOK
Dec 4 2013, 11:08
- in FII View
Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.