The COVID-19 pandemic wreaked havoc in the previous year, highlighting the importance and inadequacies of the healthcare and current medical services in the nation. As a result, the government intends to make huge investments in the healthcare sector via initiatives such as E-health, which entails providing telemedicine and telehealthcare in rural part of India through remote consultation.

After the outbreak of the coronavirus, the healthcare sector has grown to become one of the most prominent. In the years ahead, the healthcare sector will remain a top priority as we work to reduce the effects of the second wave of COVID-19 through massive vaccination drives and preventative health and hygiene initiatives.

Moreover, India is considered as pharmacy of the world due to its large-scale contribution in supplying generic drugs globally. Considering these growth drivers of healthcare sector that exhibit huge potential, investment by mutual funds route in this sector offers an opportunity to benefit from this growing segment.

Having said that, there are various healthcare funds existing in the market some are actively managed, while few passively managed. If you are looking to take exposure in healthcare space, you may consider the Exchange Traded Funds (ETF) option, as it will be listed on exchange and track the benchmark index. In case of healthcare sector, it is the Nifty Healthcare Index, which consist stocks of companies with high growth potential.

Many fund houses have introduced several healthcare funds and recently Axis Mutual Fund introduced the first passively managed healthcare ETF. Similarly, ICICI Prudential Mutual Fund has launched ICICI Prudential Healthcare ETF, which stands second in the healthcare ETF category; it is an open-ended Index Exchange Traded Fund tracking Nifty Healthcare Index.

On the launch of this fund Mr Nimesh Shah MD & CEO of ICICI Prudential AMC said, “ICICI Prudential Healthcare ETF provides exposure to a basket of securities in the healthcare sector. Given the rising health problems, lifestyle choices, and outbreak of epidemics, the healthcare sector has a strong potential to grow steadily in the coming decade. Also, the need for better healthcare facilities will always be a constant need, considering the large population of India. Therefore, this sector provides a good scope of investment.”

Table 1: Details of ICICI Prudential Healthcare ETF

Type An open-ended Index Exchange Traded Fund tracking Nifty Healthcare Index. Category Exchange Traded Fund
Investment Objective The investment objective of the scheme is to provide returns before expenses that closely correspond to the total return of the underlying index subject to tracking errors. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
Min. Investment Rs 1000/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
Entry Load Not Applicable Exit Load Nil
Fund Manager – Mr Kayzad Eghlim
– Mr Nishit Patel
Benchmark Index Nifty Healthcare TRI
Issue Opens: May 06, 2021 Issue Closes: May 14, 2021

(Source: Scheme Information Document)

What will be the Investment Strategy for ICICI Prudential Healthcare ETF?

This scheme will aim to predominantly invest in stocks constituting the Nifty Healthcare Index in the same proportion as in the Index and endeavour will be to track the benchmark index. The corpus of the scheme will be invested in securities forming part of the underlying index.

This scheme will be passively managed and replicate the index to generate corresponding returns and it aims to maintain a low tracking error by closely aligning the portfolio in line with the index. The scheme will also invest a very small portion (0-5% of the Net Assets) of the fund in debt, money market instruments and units of debt ETFs to meet the liquidity and expense requirements.

Through this scheme, investors will get access to multiple facets of healthcare and exposure to growing securities in healthcare sector. The scheme will aim to offer exposure in healthcare space by investing in stocks of potential healthcare oriented companies.

The stocks comprising the underlying index are periodically reviewed by Index Service Provider. If a particular stock may be dropped or new securities may be included as a constituent of the index, in such an event, the scheme will endeavour to reallocate its portfolio but the available investment/ disinvestment opportunities may not permit precise mirroring of the underlying index immediately.

About the benchmark

The Nifty Healthcare Index is designed to reflect the behaviour and performance of the Healthcare companies. Nifty Healthcare Index is computed using free float market capitalization method, wherein the level of the index reflects the total free float market value of all the stocks in the index relative to particular base market capitalization value.

NIFTY Healthcare Index comprises of the 20 largest healthcare oriented companies by free float market capitalization.  

The following is list of Top constituents under the index by their weightage as of now:

(Source: NSE Nifty Healthcare Index)

This scheme apart from investing 95% of its assets in Equity and Equity related securities of companies constituting the underlying index; it will also invest up to 5% of its assets in Money market instruments including TREPs, Units of debt schemes and up to 5% in units of Debt ETFs in order to meet the liquidity requirements of this scheme.

Under normal circumstances, asset allocation will be as under:

Table 2: Asset Allocation for ICICI Prudential Healthcare ETF

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity and Equity related securities of companies constituting the underlying index (Nifty Healthcare Index) 95 100 Medium to High
Money market instruments including TREPs*, Units of debt schemes# 0 5 Low to Medium
Units of Debt ETFs 0 5 Low to Medium

*Or similar instruments as may be permitted by SEBI/RBI from time to time, subject to requisite approvals from SEBI/RBI, as applicable.

#Excluding subscription money in transit before deployment/payout.

(Source: Scheme Information Document)

Who will manage ICICI Prudential Healthcare ETF?

Mr Kayzad Eghlim and Mr Nishit Patel will be the dedicated fund managers for this scheme.

Mr Kayzad Eghlim is Vice President and Fund Manager at ICICI Prudential Asset Management Company Ltd. and he has over 30 years of experience. Prior to this, he was associated with IDFC Investment Advisors Ltd as Dealer Equities, Prime Securities as Manager, Canbank Mutual Fund (IS Himalayan Fund) as Fund Manager, Canbank Mutual Fund as  Equity Dealer, Assisting the Fund Manager and worked with the Primary Market Department (IPO) at the beginning of his career.

His qualification includes, MBA, M.Com and B.Com. Currently other schemes managed by him are ICICI Prudential Equity – Arbitrage Fund, ICICI Prudential Nifty 100 ETF, ICICI Prudential Nifty Next 50 Index Fund, ICICI Prudential Nifty ETF, ICICI Prudential NV20 ETF, ICICI Prudential Sensex ETF,  ICICI Prudential Nifty Index Fund,  ICICI Prudential Equity Savings Fund,  ICICI Prudential Nifty Low Vol 30 ETF, BHARAT 22 ETF, ICICI Prudential S&P BSE 500 ETF, ICICI Prudential Nifty Next 50 ETF, ICICI Prudential Bharat 22 FOF, ICICI Prudential Bank ETF, ICICI Prudential Midcap Select ETF, ICICI Prudential Midcap 150 ETF, ICICI Prudential Alpha Low Vol 30 ETF, ICICI Prudential IT ETF and ICICI Prudential Nifty Low Vol 30 ETF FOF.

Mr Nishit Patel is Fund Manager – Passive Funds at ICICI Prudential Asset Management Company Ltd. and prior to this he was working under ETF Business at ICICI Prudential AMC.

Mr Patel is Chartered Accountant and B.com, currently other schemes managed by him are ICICI Prudential Midcap Select ETF, ICICI Prudential Nifty 100 ETF, ICICI Prudential Nifty Next 50 Index Fund, ICICI Prudential Nifty ETF, ICICI Prudential NV20 ETF, ICICI Prudential Sensex Index Fund, ICICI Prudential Nifty Index Fund, ICICI Prudential Regular Gold Savings Fund (FOF), ICICI Prudential Gold ETF, ICICI Prudential Sensex ETF, ICICI Prudential S&P BSE 500 ETF, ICICI Prudential BHARAT 22 FOF, ICICI Prudential Nifty Next 50 ETF, ICICI Prudential Bank ETF, ICICI Prudential Private Banks ETF, ICICI Prudential Midcap 150 ETF, ICICI Prudential Alpha Low Vol 30 ETF, BHARAT 22 ETFICICI Prudential IT ETF and ICICI Prudential Nifty Low Vol 30 ETF FOF.

Fund Outlook – ICICI Prudential Healthcare ETF

The ICICI Prudential Healthcare ETF will seek to invest in securities that comprise the underlying index and replicate the index in order to provide investors with a way to benefit from one of India’s fastest-growing sectors.

The scheme offers investors an exposure to Indian healthcare companies that provide profound investment opportunities with growing technological development and medical advancement in domestic healthcare sector.

The scheme will be a passively managed ETF, which is based on the underlying index and it eliminates the stress of stock selection. India is expected to continue playing a key role in fulfilling the drug requirement; this growth is likely to be driven by improving healthcare facilities, which will give this scheme a long-term positive outlook. 

However, ICICI Prudential Healthcare ETF is a sector-oriented fund, which will focus only on healthcare sector, and this creates concentration risk. Sectoral funds have a high-risk high return investment approach and this is suitable only for aggressive investors who can stomach high risk and have an investment horizon of at least 5-7 years.

This article first appeared on PersonalFN here


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