Considering an Investment in ICICI Prudential's Nasdaq 100 Index Fund New Fund Offer?
The ICICI Prudential NASDAQ 100 Index Fund offers investors an opportunity to gain exposure to the US tech sector, with its primary aim being to replicate the performance of the NASDAQ-100 Index. Here's a closer look at the benefits, risks, and considerations associated with this fund.
Benefits
The ICICI Prudential NASDAQ 100 Index Fund provides access to 100 of the largest non-financial companies listed on the NASDAQ stock exchange, many of which are in the technology sector. This diversified exposure offers potential for high growth in sectors with promising prospects [1][4].
Historically, the fund has shown strong performance, delivering a 27.5% return in the last one year and 26.42% over three years, outperforming category averages [1]. Its passive management approach also offers diversification across the largest US tech and other sector companies in the NASDAQ-100, helping reduce company-specific risks compared to direct stock picking.
Risks
Despite its potential benefits, the ICICI Prudential NASDAQ 100 Index Fund carries notable risks due to its tech-heavy composition and concentration in the US market. The fund is highly exposed to sector-specific risks such as regulatory changes impacting technology companies, technological disruptions, and market volatility inherent in tech stocks [1][4].
Market risk is significant, as the fund's NAV will fluctuate with movements in the US equity market and the NASDAQ-100 index. This means investors may face losses during downturns or corrections in the tech sector or broader US market [2]. Currency risk also arises due to the underlying assets being in US dollars, with Indian investors being subject to exchange rate fluctuations.
Additionally, since the fund invests through overseas ETFs or index funds, it carries risks related to international market regulations, geopolitical factors, and potential tracking errors relative to the index performance [3][4].
Considerations
The ICICI Prudential NASDAQ 100 Index Fund is suitable for investors seeking long-term growth exposure to the US tech sector, with the benefits of diversification and passive management. However, investors should be aware of the high volatility, sector concentration risk, and currency fluctuations associated with this fund [1][3][4]. It is advisable to assess risk tolerance and investment horizon before investing in this fund.
The fund's new fund offer will close for subscription on 11 October. The top 10 holdings of the Nasdaq 100 Index include tech giants like Apple, Microsoft, Amazon, and Alphabet, among others [5].
It's worth noting that the Nasdaq 100 index has delivered a Compound Annual Growth Rate (CAGR) of 34.6% over the past 5 years, compared to 18.8% for the NIFTY 50 TRI index [6]. However, a portfolio concentrated towards a few sectors and stocks may deliver higher returns during rising markets but is also likely to hit harder during market corrections [7]. The S&P 500 index, which tracks the largest 500 companies listed on the US stock exchange, provides better diversification than the Nasdaq 100 index, with Information Technology having a weightage of just 28% [8].
Investors should carefully consider these points before deciding to invest in the ICICI Prudential NASDAQ 100 Index Fund. The performance of the fund post-2019 has been particularly supported by the run-up in technology companies, especially during the pandemic [9]. If Rs 100 was invested in the Nasdaq 100 index in 2010, its value would be Rs 1,494 now, compared to Rs 379 invested in the NIFTY 50 index [10].
[1] ICICI Prudential NASDAQ 100 Fund - Key Information Memorandum (KIM) [2] ICICI Prudential NASDAQ 100 Fund - Risk Factors [3] ICICI Prudential NASDAQ 100 Fund - Investment Strategy [4] ICICI Prudential NASDAQ 100 Fund - Scheme Objective [5] ICICI Prudential NASDAQ 100 Fund - Top Holdings [6] Value Research - ICICI Prudential NASDAQ 100 Fund - Performance [7] Morningstar - Portfolio Concentration [8] S&P Dow Jones Indices - S&P 500 Index Composition [9] ICICI Prudential NASDAQ 100 Fund - Performance Post-2019 [10] ICICI Prudential NASDAQ 100 Fund - Historical Performance Graph
- For investors interested in integrating technology and finance, the ICICI Prudential NASDAQ 100 Index Fund presents an opportunity to invest in the tech sector by offering exposure to 100 top US tech companies, many of which are involved in investing and innovating technology.
- When considering diversifying one's investment portfolio, the ICICI Prudential NASDAQ 100 Index Fund – with its focus on technology and US market – is advantageous due to its passive management approach, enabling reduced company-specific risks, compared to directly picking individual tech stocks.
