Axis MF has launched the S&P 500 ETF Fund of Funds which replicates/tracks the S&P 500 TRI. This fund will start recruiting on his 22nd.nd Closes March and 5th April 2023. When the US stock market has underperformed over the past year, is this a good time to invest in such a fund? Axis S&P 500 ETF Fund of Funds NFO Details of the problem and whether to invest or avoid.
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Axis S&P 500 ETF Fund of Funds – NFO Issue Details
This is an open-ended mutual fund equity scheme.
| The scheme will open | 22-3-23 |
| scheme close | April 5, 23 |
| Schemes for continuous purchases/sales are reopened | Within 5 business days |
| Minimum amount | 500 rupees |
| Minimum SIP | Rs 500 for 12 months |
| Fund’s NAV | Rs 10 during NFO period |
| entry road | none |
| exit road | 0.25% redemption within 30 days |
| dangerous | very expensive |
| standard | S&P 500 TRI |
| fund manager | Vinayak Jayanath |
| Maximum TER | 2.00% |
What is the Axis S&P 500 ETF FoF NFO investment objective?
Replicate the performance of the S&P 500 TRI by investing in exchange traded funds that replicate the S&P 500 TRI. Subject to tracking errors.
What is the allocation pattern for this mutual fund scheme?
The allocation pattern for this scheme is:
| instrument type | min % | Max % | risk profile |
|---|---|---|---|
| Number of Units/Shares of Listed Investment Trusts Replicating the S&P 500 TRI |
95% | 100% | very expensive |
| Liabilities, money market instruments and/or units liquid scheme |
0% | Five% | low to moderate |
How has the S&P 500 Index performed over the past 5-10 years?
Below is the total return (price return + dividend yield) in USD and INR (because the Rupee has been depreciating over the last few years).
US dollar conversion
- 1 year return – minus 9.6%
- 3-year annualized return – 17.5%
- 5-year annual return – 9.2%
- 10-year annualized return – 11.7%
on INR terms
- 1 year return – minus 1.7%
- 3-year annualized return – 21.8%
- 5-year annual return – 14.5%
- 10-year annualized return – 16.6%
Why invest in the Axis MF S&P ETF FoF?
There are several reasons to invest in this fund.
1) The US S&P 500 Index is widely regarded as the premier single index for US large-cap stocks. The index is designed to measure the performance of the top 500 publicly traded companies in the US and covers approximately 80% of available market capitalization.
2) The S&P 500 Index has a low correlation with the Indian equity market. This helps diversify your portfolio.
3) S&P 500 index companies have global exposure in terms of sales. This eliminates the need to focus solely on domestic sales.
4) The S&P 500 Index dividend yield has remained stable over the past five years. The current benchmark yield for 2023 is 1.7%.
5) Indian investors can benefit from dollar hedging and a stronger US dollar by investing in such global mutual funds. This can be clearly seen in the performance of the index against the US dollar. INR terms.
Why should I avoid Axis MF S&P ETF Fund of Fund NFO?
You should consider some of these risk/negative factors before investing.
1) This fund is from Axis MF, some of the fund managers were involved in front-running fraud and Axis MF terminated these fund managers a few months ago. Axis MF underperformed across mutual fund schemes The past year covered as part of an earlier article.
2) The risks of investing in foreign securities involve foreign currency and country risks associated with the depreciation of foreign currencies.
3) The scheme shall invest in securities listed on foreign stock exchanges. Therefore, as mentioned above, all risk factors related to foreign stock exchanges such as market trading risk, liquidity risk and volatility risk also apply to the scheme.
4) There is a global recession and the stock market could fall in the past year. It could take a year or two to recover from such a recession and get back on a growth trajectory.
Also read: 5 Debt Funds with the Highest SIP Returns
Should I invest in the Axis S&P 500 ETF Fund of Funds NFO?
Axis S&P 500 ETF FoF is a global MF scheme that invests in the S&P 500 Index. The index has performed moderately in the medium to long term, yielding 9% to 11.7% in USD terms and 14.5% to 16.6% in INR terms over the past 5-10 years. Such funds are good for portfolio diversification and international exposure.
On the other hand, the index produces modest returns in USD terms. Investors should not carry forward INR terms as they cannot expect Rs depreciation in the future (this is unknown).
High-risk investors seeking international exposure and portfolio diversification and wishing to invest in the medium to long term can invest in such index funds.
Axis S&P 500 ETF FoF NFO analysis is based on SID on SEBI website
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Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and NISM Certified – Research Analyst. He has been analyzing financial markets for the past 20 years.
