ING OptiMix Financial Planning Fund: Four-way approach

Managing a portfolio of mutual funds is no mean task. It requires investors to constantly monitor, if not churn, their portfolios to make sure returns are in line with their objective. The new fund offering from ING Investment Management seeks to address this. Its new fund, ING OptiMix Financial Planning Fund is a multi-manager FoF, which will invest in the best-of-breed mutual funds across fund houses and monitor and churn the funds portfolio regularly.

While this isn't the first multi-manager FoF from the AMC, it is unique given its strategy of investing across the equity, debt and gold asset classes. In contrast, FoFs from other fund houses typically invest in funds from their AMC only. Besides, this is the first FoF that has an option to add exposure to gold ETFs.

Strategic asset allocation

The FoF comes with four different asset allocation plans — cautious, conservative, prudent and aggressive — that vary on their exposure to equity funds, debt funds, liquid and money market funds and Gold ETFs. The four plans have different benchmarks.

Our take

No doubt, the fund's investment proposition is attractive and makes a good vehicle for investors looking for low-risk options or to mark an entry in mutual fund investing. The FoF will give its investors exposure to different asset classes, while actively managing the portfolio of funds under its ambit.

What also scores in its favour is that the AMC is experienced in this segment and is the only fund house in India to offer multi-manager FoFs. It had launched its first such fund in early 2006, when existing FoFs invested in funds from within the same AMC only. That the plans under the proposed scheme will invest in third party mutual funds only and not make any investments in its own schemes removes concerns of any bias.

On the flip side, its returns would always lag the top funds in its category. Given the very nature of its investment strategy, which involves investing across different fund offerings, returns from the new fund may never be top of the order.

Investors may, therefore, do well to temper their returns expectations. Interestingly, while the FoF may limit upside potential, by the same logic it would also limit the downside.

For instance, ING OptiMix Asset Allocator Fund, which invests in both equity and debt funds, has returned about 8 per cent and 6.4 per cent one a one and three-year time frame.

However, it managed to limit its downside to just about 21 per cent in 2008. The FoF route in the Indian context has not so far proved to be a good substitute to holding a basket of diversified funds in terms of performance. The offer closes on May 3.

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