Mirae Asset NYSE FANG Plus ETF review: Should you invest in the NFO?

Over the past couple of years, international investing has found many takers. Many global technology majors are household names and increasingly fund houses have begun giving you options to invest in them.

Mirae Asset has rolled out a new fund offer (NFO). Called the Mirae Asset NYSE FANG Plus ETF or MAFANGETF (MFP), you will need a demat account for investing in the ETF. The house is offering a fund of funds (FOF) route to allow you to invest in the MFP.

What’s on offer

MFP offers will replicate the NYSE FANG Plus Index (NFPI). The NFPI provides exposure to ten of today’s highly traded tech giants, listed overseas. These include Facebook, Apple, Amazon, Netflix, Google (Alphabet), Alibaba, Baidu, NVIDIA, Tesla and Twitter.

FAANG is a popular acronym that stands for Facebook, Apple, Amazon, Netflix and Alphabet Inc.’s Google. Now FANG Plus has  five other stocks mentioned earlier.

These are large behemoths and offer services that are used by millions of individuals across the world. These businesses put together offer a large pool of profits, hold significant amount of cash and have demonstrated ability to grow in various geographies of the world.

NFPI is rebalanced quarterly. NFPI has delivered 33.41 percent annualized return between September 2014 and March 2021, as compared to 20.77 percent for the NASDAQ-100, 13.23 percent for the S&P 500 and 22.82 percent for the S&P 500 Information Technology, as per data sourced from ICE Data Indices – the sponsor and administrator of NFPI.

What works

The fund offers exposure to well-established technology sector leaders in their respective segments. Investing in leaders reduces the risk of failure of a business. Most of the businesses in this index are known for their innovations. Equal allocation to each one of them further curtails the risk of over allocation to one or a few of the businesses.

“Since these businesses are not available in Indian listed equity space, an exposure to this index brings in meaningful diversification to your portfolio. The low-cost fund of fund route may be a good way to invest.” says Ravi Kumar TV, Founder of Gaining Ground Investment Services

What doesn’t

It is a highly concentrated index. A 10-stock portfolio means investors are exposed to concentration risk. You cannot ignore the possibility of downward volatility in case even one business is hit with any adverse development.

These businesses are facing many regulatory challenges in various countries. Some of these companies have often faced accusations by policy makers of various countries, worldwide, over privacy concerns, using their monopolistic might to push their products, and in some cases tracking their consumers’ behavior.

These companies have time and again run the risk of being regulated and restricted by countries that are evolving their technology laws. Any headway here could lead to significant business risks and downsides.

What should you do?

A thematic offering is far riskier than a focused equity or a thematic fund.

Invest in MFP or the fund of fund scheme if and only if you understand the risks of a concentrated portfolio. Even if you do, stagger your investments. MFP is not for first-time investors

The NFO of the ETF closes on April 30, 2021 and that of the FoF ends on May 3, 2021.