Invesco Global Consumer Trends Fund of Fund review: Should you invest?

If the Diwali crowds in major cities across India were any indicators, consumers seem keen on spending. And they are tired after being cooped up in their houses throughout the lockdown. But unlocking has slowly begun. And as global economies start to unlock, companies that benefit from consumerism stand to benefit. Invesco mutual fund has rolled out a Global Consumer Trends Fund of Fund (IGCF) to benefit from just that phenomenon.

What’s on offer

IGCF will invest its entire corpus in the international scheme, Invesco Global Consumer Trends Fund (IGCT). The scheme is benchmarked against the MSCI World Consumer Discretionary Index. IGCT, the underlying fund with a 22-year track record, invests in shares of companies engaged in design, production and distribution of products and services. The fund aims to capitalize on the evolving nature of consumption habits of individuals, driven by changes in standard of living, demographics, connectivity and digital lifestyle. The way individuals consume has changed a lot over the last decade and this process of change may accelerate further after the pandemic.

What works

IGCT with USD 2.76 billion in assets under management, as on October 31, 2020 has invested in a fairly diverse portfolio of stocks of companies from various sectors such as e-commerce, direct retail, restaurants, hotels, casinos, gaming and social media. Some of the top holdings include Amazon (10.2 percent), Alibaba (7.9 percent), Penn National Gaming (6.4percent), Lowe’s (3.9 percent) and Caesars Entertainment (3.8 percent) among others. The portfolio companies earn 52 percent of their revenues from the US and 16.71 per cent from developed markets excluding the US. Rest of the revenues are earned from other parts of the world.

As per the presentation released by the fund house, the returns since inception till October 31, 2020 stood at 9.57 percent in USD terms and 12.37 percent in rupee terms. The international scheme’s track record, though no guarantee of future performance, offers some comfort to investors keen to invest overseas.

Geographical diversification, low correlation with Indian equities further make it an attractive investment option.

What doesn’t

The scheme is a thematic offering. Though the underlying consumer trends are fairly well-diversified, sectors such as financials, pharmaceuticals and industrials will be excluded from the stock universe.  While investing overseas, most investors are better off with index funds offering low-cost diversified exposure, unless they have access to advice.

Though past performance has been good and the fund has the ability to invest across equity markets, the investors hereon need to moderate their expectations of returns. Since this is an actively managed fund, the costs are on the higher side compared to an index fund.

“Investors have to watch if the scheme consistently beats the benchmark. In developed markets, actively managed funds especially find it difficult to beat the index consistently and investors in index funds have an edge in the form of low costs,” says Vidya Bala, co-founder of PrimeInvestor.in.

“For most investors who want to start building their international exposures, a diversified low cost index fund makes sense,” says Vishal Dhawan, founder and chief financial planner of Plan Ahead Wealth Advisors. “Invesco's offering can be a part of investor satellite portfolios where they already have a core portfolio of international funds,” he adds.

What should you do?

Only savvy investors looking for thematic offerings should consider IGCF for now. But make sure you invest through the systematic investment plan (SIP) mode, as global markets are on a high due to unprecedented liquidity. Moderate your return expectations and be prepared for volatility in the short term. New investors and those with a low risk appetite can skip the NFO. The new fund offer will close on December 18, 2020.