JP Morgan JF Greater China Equity Offshore Fund NFO

by Manshu on July 22, 2009


JP Morgan Greater China mutual fund is a fund of funds. This means that it will not directly invest in stocks but invest in a mutual fund, which in turn invests in stocks.

The difference between the JP Morgan Greater China fund and most other fund of funds is that this fund will primarily be invested in just one mutual fund — JF Greater China Equity Fund. Normally, the fund will invest at least 80% of its assets with the JF Greater China Equity Fund.

The first thing I think about when I hear – fund of funds – is double fees. A fund of funds normally has its own fees and then because it invests in some other fund – investors are indirectly charged the fee of that fund as well.

In this case, JP Morgan JF Greater China fund charges an expense of 0.75% of net assets and then you will have to incur the expenses of the underlying fund – JF Greater China Equity fund.

Obviously that is not a good thing but I think this is the only fund that allows Indian investors to invest in Chinese companies and I’d like to hear if you are familiar with other funds which do that.

Since this fund invests in equities, it is saddled with all the usual risks that are faced by mutual funds that invest in equities. In addition to that there is a currency risk also, which is not very common for mutual funds in India. Since the fund is based in one country and invests in another, there are at least two currencies involved here and exchange rate fluctuation between the two currencies will impact your return. I say at least two currencies because the Chinese Yuan and Indian Rupee are involved at the minimum. I am not sure whether some transactions are going to be made in US Dollars or not.

The other thing about the JP Morgan Greater China fund is that since it invests in foreign securities, a SEBI cap of $300 million is applicable on the scheme. The cap means that the entire investment of the fund is limited to $300 million and can’t go beyond that. This cap is applicable on the mutual funds of the sponsor and not this particular scheme alone. That means there is a chance that you could get only pro rata allotment on this NFO. This is very normal for IPOs, but doesn’t happen a lot on New Fund Offers.

JP Morgan Greater China NFO Dates

This is an open ended equity fund whose NFO opened on 9th July 2009 and will close on 31st July 2009. The mutual fund will then trade from 28th August 2009.

Minimum Application for JP Morgan Greater China NFO

The minimum application for this fund is Rs.10,000.

Benchmark for JP Morgan Greater China NFO

The benchmark for this scheme is the MSCI Golden Dragon Index.

Load Structure of JP Morgan Greater China NFO

There is an entry load of 2.25% when you invest less than 5 crores. There is an exit load of 1% if you are exiting the fund within two years of allotment and have bought it through a Systematic Investment Plan (SIP). The exit load is charged only if you exit within six months if you bought the fund in any way other than the SIP.

You can find the Key Information Memorandum and application form here.

This is just a summary of the JP Morgan Greater China NFO and is not a buy or sell recommendation on the mutual fund.

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