I recently wrote about a fund of funds scheme – HSBC Brazil Equity fund, and today I am going to cover the Quantum gold savings fund, which is another fund of funds scheme that will primarily be invested in the Quantum Gold Fund ETF.
As I have probably stated a gazillion times already – a fund of funds scheme incurs double expenses. Once – of the fund itself, and then of the underlying fund as well.
However, in the case of this fund – the expenses section of the prospectus states that the annual recurring expenses of the scheme will be borne by the AMC and there will be no investment management fee as well.
Here is what it states:
These are the fees and expenses for operating of the Scheme. The annual recurring expenses of the Scheme shall be borne by the AMC. The AMC shall not charge any investment management fees.
This is certainly interesting and a good thing too, however, this fund will primarily be invested in the Quantum gold fund ETF that you can invest in directly, so you need to have really good reasons on why you just don’t go ahead and buy that ETF itself.
I was thinking of a situation where I might want to buy this fund, but couldn’t think of any (especially because this fund will have a minimum of 90% of its assets invested in the Quantum gold fund.).
I’d be interested to hear if you have any reasons to think that investing in this fund of funds scheme instead of the Quantum gold ETF will benefit you.
The fund does have an exit load of 1.5%, if you exit before 1 year of the date of allotment and here is an interesting passage from the prospectus:
The investors of the scheme will bear dual loads i.e. those of the scheme and those of Quantum Gold Fund. Hence, the investor under the scheme may receive lower pre-tax returns than what they could have received if they had invested directly in underlying scheme in the same proportions.
Another thing that caught my eye was that every funds lists down its minimum target amount when it files its prospectus with SEBI. If they receive applications for a sum less than the target amount – they refund the application money to all investors. This fund has a target amount of Rs. 1 lakh, which is one of the lowest targets I have seen.
It would be interesting to see how well this fund is received by the investing public and what impact it has on the underlying fund. I wonder if the volumes will be meaningful enough to make any difference to the Quantum gold savings fund.