Investors’ perceptions about investments have been evolving; Passive funds are gaining popularity among Indians. Passive investing through low-cost index funds has been an option available for investors for a while now. Investors prefer a better control over their investments and the ability to create a robust portfolio that can withstand changing market conditions.

You may consider building your all-weather portfolio with Quantum Mutual Fund’s DIY 12-20-80 Asset Allocation Strategy, a time-tested approach that has the potential to minimise downside risk and build a well-diversified portfolio that capable to survive the tides of market volatility. This asset allocation strategy could potentially offer your portfolio the correct mix of stability, growth, and protection.

The fund house believes that despite changing market preferences, asset allocation is fundamental to any long-term successful investing. Diversification and efficient asset allocation offered by an all-weather portfolio can offer investors the opportunity to benefit from various market cycles. Given the current market volatility, a portfolio composed mainly of large-cap companies is necessary to form the foundation of your portfolio.

If you want to keep your portfolio stable and generate decent returns while betting on large-cap stocks in this volatile market, you should consider investing in the NIFTY 50 Index. It provides access to a basket of India’s top 50 large-cap companies on the basis of full market capitalisation across sectors.

Quantum Mutual Fund has launched Quantum Nifty 50 ETF Fund of Fund, which is India’s first-of-its-kind Nifty 50 ETF Fund of Fund. It is an open-ended Fund of Fund Scheme investing in units of Quantum Nifty 50 ETF. It brings you an easy way to ride India’s growth story with exposure to the top 50 blue-chip companies in the Nifty 50 Index. With this new fund offering, the fund house continues to dive deeper into the passive space, offering investors ease of investment and diversification in a single product.

On the launch of this fund, Mr Chirag Mehta, CIO- of Quantum Mutual Fund, said, “Investors can build their investment portfolio by adopting a passive approach in Quantum’s DIY 12-20-80 Asset Allocation Strategy. This strategy has the potential to minimise downside risks and achieve your long-term goals. As per this strategy, investors dedicate money worth 12 months of their expenses in a liquid fund and 20% of their investable money to gold; the rest 80% can be allocated to equity. Investors can allocate 85% of their equity investments to Quantum Nifty 50 ETF Fund of Fund, while the rest 15% can be allocated to Quantum India ESG Equity Fund.”

Table 1: Details of Quantum Nifty 50 ETF Fund of Fund

Type An open-ended Fund of Fund Scheme investing in units of Quantum Nifty 50 ETF Category Fund of Fund
Investment Objective The investment objective of the Scheme is to provide capital appreciation by investing in units of Quantum Nifty 50 ETF – Replicating / Tracking Nifty 50 Index. There is no assurance or guarantee that the investment objective of the scheme will be achieved.
Min. Investment Rs 500/- and in multiples of Rs 100/- thereafter. Face Value Rs 10/- per unit
Plans
  • Regular
  • Direct
Options Growth
Entry Load Not Applicable Exit Load Nil
Fund Manager Mr Hitendra Parekh Benchmark Index NIFTY 50- Total Return Index
Issue Opens: July 18, 2022 Issue Closes: August 01, 2022

(Source: Scheme Information Document

The investment strategy for Quantum Nifty 50 ETF Fund of Fund is as follows:

Quantum Nifty 50 ETF Fund of Fund uses a ‘passive’ approach to try and achieve the Scheme’s investment objective. The scheme would invest in the units of Quantum Nifty 50 ETF.

The returns of Quantum Nifty 50 ETF Fund of Fund will replicate the returns generated by the underlying ETF subject to tracking errors and expenses of the scheme. The endeavour will be to keep tracking errors as low as possible following the passive approach of the scheme.

About Quantum Nifty 50 ETF:

Quantum Nifty 50 ETF (Q Nifty) is an Open-Ended Scheme listed on the National Stock Exchange of India Limited in the form of an Exchange Traded Fund (ETF) tracking a pre-specified benchmark/index, the – Nifty 50 Index.

The underlying scheme Quantum Nifty 50 ETF’s one unit represents approximately 1/10th of the Nifty 50 Index. The scheme diversifies across the top 50 companies in different sectors through a single investment. The fund’s performance is in line with the index, subject to tracking errors. Here’s the graph representing Quantum Nifty 50 ETF performance since inception:

(Source: Quantum Nifty 50 ETF FoF PPT

The AMC does not make any judgments about the investment merit of a Quantum Nifty 50 ETF, nor will it attempt to apply any economic, financial or market analysis. The passive approach eliminates active management risks in regard to over / underperformance vis-a-vis the benchmark. The Scheme will buy/sell units from the underlying scheme, i.e., Quantum Nifty 50 ETF in the creation of unit size or through the secondary market through the stock exchange route to achieve the investment objectives.

The Scheme would endeavour to stay invested in the underlying scheme practically to the maximum extent possible at all times. However, the Scheme would also maintain some funds for meeting expenses and redemption purposes in order to meet the liquidity requirements of the Scheme as prescribed in the Asset Allocation.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation for Quantum Nifty 50 ETF Fund of Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Units of Quantum Nifty 50 ETF 95 100 High
Government Securities & Treasury Bill Maturity up to 91 days, Tri-Party Repo and Liquid Schemes of Mutual Funds 0 5 Low

(Source: Scheme Information Document

About the benchmark

The NIFTY 50 index is a well-diversified 50 companies index accounting for 13 sectors of the economy and reflecting overall market conditions. NIFTY 50 Index is computed using the Free Float market capitalisation method.

The Nifty 50 Index represents India’s top 50 blue-chip companies and has a history of wealth creation of over 20 years.

Here’s the list of top 10 constituents by their weightage under this index as of June 30, 2022:

(Source: Quantum Nifty 50 ETF FoF PPT

Note that the index is rebalanced semi-annually on the basis of 6 months’ data.

Who will manage Quantum Nifty 50 ETF Fund of Fund?

The designated fund manager for this scheme is Mr Hitendra Parekh. He holds a B.com and Master’s in Financial Management degree and has an overall 29.5 years of experience in Equity Markets. Prior to joining Quantum Mutual Fund, Mr Parekh was Head of Operations with UTI Securities Ltd. and was working for Unit Trust of India (UTI) as Fund Accountant.

At Quantum AMC, Mr Parekh currently manages Quantum Nifty 50 ETF.

Fund Outlook – Quantum Nifty 50 ETF Fund of Fund

Quantum Nifty 50 ETF Fund of Fund aims to invest in units of Quantum Nifty 50 ETF in a similar proportion to generate parallel returns, subject to tracking errors. The scheme offers a convenient way to make a passive investment. The underlying fund provides a diversified portfolio across the top Nifty 50 stocks in different sectors at a lower expense ratio.

The fund combines the efficiency of an ETF with the convenience of an index fund, giving investors the best of both worlds. The underlying Quantum Nifty 50 ETF tracks/replicates India’s Nifty 50 companies and has a proven track record of 14 years and counting. Over the long term, investing in the NIFTY 50 Index presents a great gateway into the equity market and is a good opportunity for investors to create wealth. Being a Fund of Fund scheme, it eliminates the risk of security selection. It relies on broader market wisdom and replicates the index constituents in the same proportion to generate parallel returns.

However, do note that the scheme invests the majority of its assets in equities, which are highly volatile in nature. The scheme is prone to high market risk due to the persistent repercussions of the Russia-Ukraine conflict, rising interest rates, and spiralling inflation may pose a significant risk to economic growth and are the root cause of the prevailing intensified market volatility. The margin of safety appears to be narrow, and the clear direction for the equity market from the current elevated levels is unknown. Among many other factors, these may affect the scheme’s performance, and the portfolio may face higher volatility in the near term.

Thus, if you consider investing in Quantum Nifty 50 ETF Fund of Fund, ensure you hold a high-risk appetite and a long investment horizon to sustain market volatility. Your investment objective should align with the fund.

This article first appeared on PersonalFN here


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