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    ICICI Pru’s new ETF not for retail investors, say advisors

    Synopsis

    The fund aims to build a focused portfolio of 30 companies chosen from the top 150 companies using a multi-factor approach.The NFO is open and closes on August 10.

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    Retail investors — especially first-timers — could give the the new fund offer (NFO) of ICICI Prudential Alpha Low Vol 30 Exchange Traded Fund (ETF) a miss. Investment advisors said the risk of lower liquidity and absence of a track record do not make it a good investment option at this juncture.

    “Volumes in ETFs are low and there could be liquidity issues, which many retail investors do not understand. Retail investors should avoid the NFO and wait to see the liquidity and track record,” says Anup Bhaiya, CEO, Money Honey Financial Services.

    The NFO is open and closes on August 10. The fund will be managed by Kayzad Eghlim. The fund aims to build a focused portfolio of 30 companies chosen from the top 150 companies using a multi-factor approach.

    Using this strategy, the fund manager will buy companies based on a combination of alpha — returns over the benchmark — and low volatility. Half of the portfolio will be in stocks that have generated high alpha over the last twelve months with the balance going to stocks that exhibit low volatility.

    Since this will be passively managed, the expense ratio of the fund will be 40 basis points.

    A study by ICICI Prudential MF shows that Nifty Alpha Low Volatility 30 TRI (Total Returns Index) has outperformed the other indices like Nifty 50 TRI, Nifty 100 TRI and S&P 500 TRI in eight out of the last 10 years.

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