Should you invest in Quantum Nifty 50 ETF Fund of Fund NFO?

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Quantum Mutual Fund has launched the Quantum Nifty 50 ETF Fund of Fund. This fund will be India’s first open-ended Nifty 50 ETF Fund of Fund and this scheme will be investing in units of Quantum Nifty 50 ETF. It basically provides an opportunity for passive investors to be a part of India’s growth story by providing exposure to the Nifty 50 Index, which is one of the benchmark indices of the Indian Stock Market. The investment objective of the Scheme as per the fund house is “To provide capital appreciation by investing in units of Quantum Nifty 50 ETF – Replicating / Tracking Nifty 50 Index but there is no assurance or guarantee that the investment objective of the Scheme will be achieved” and The fund combines the efficiency of an ETF with the convenience of an index fund, giving investors the best of both worlds.

Basic information about the NFO:

Issue open 18-Jul-22 
Issue close 01-Aug-22 
Fund manager Hitendra Parekh (Also manages the underlying Quantum nifty 50 ETF) 
Benchmark Nifty 50 
Exit Load 0 
Minimum investment amount 500 
Plan Growth 
Category Large cap 

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Pros and Risks:

Firstly let’s look at the pros: 

☐ The benefit of diversification. 

☐ The minimum investment is low and SIP option is available so it is more accessible for small investors.

☐ Low tracking error of underlying fund. 

☐ No Demat account is required. 

Now, some of the risks involved:

☐ The risk involved is high since it mostly deals with equities (100 – 95% Quantum nifty equity and 0-5% of Government securities & T.bill Maturity up to 91 days, Tri-party repo and liquid schemes of mutual funds).

☐ It is a long-term investment-focused fund so there might be some near-term consolidation.

Underlying Quantum Nifty 50 ETF risk ratio: 

☐ Beta: 0.99 

☐ Sharpe Ratio: 0.44 

☐ Treynor’s Ratio: 0.08 

☐ Sortino Ratio: 0.52 

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This fund, when compared to other FOFs, doesn’t provide much of diversification since it mainly holds units of the Quantum nifty 50 ETF but for people interested in the index ETF this can could be an option since this FOF comes with the flexibility of a mutual fund, now you may ask why not choose existing Index funds that track Nify 50, you are right, however, Though the fund is not very unique when compared to other index funds it has lower expense ratio hence after considering all the factors, we would recommend that passive investors with long-term investment objective may consider this NFO.

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