The future of autonomous and electricity-powered transportation is arriving. Electric vehicles (EVs) are seeing accelerated adoption on the back of decreasing costs. As battery technology develops further, EVs may eventually be more affordable than their internal combustion engine (ICE) competitors. We are getting closer to fully driverless/autonomous vehicles (AVs) thanks to real-world experiments and the increasing prevalence of autonomous driving features in new automobile models.
Electric Vehicle sales have increased from 120,000 units in 2012 to 6.5 million units in 2021. Major automakers accelerate electrification plans and aim for a fully electric future. Market leaders like TESLA are thriving in the market with the launch of EVs and AVs, Tesla’s Model 3 was the bestselling EV in 2021. BYD (Build Your Dreams) became the biggest EV producer in 2022, by selling about 6.41 Lakh EVs in the first 6 months of 2022.
Governments across the globe are developing policies to encourage the deployment of EVs. In the United States, the government announced its initial target of 50% EV sales by 2030. Canada targets for achieving 100% zero emissions Light Duty Vehicles (LDV) sales by 2035. European Union brought forward a host of policy and stimulus measures to accelerate Zero Emission Vehicle (ZEV) transitions to 100% by 2035.
In 2021, India extended its EV demand stimulating FAME II (Faster Adoption And Manufacturing Of Hybrid And Electric Vehicles) policy to 2024. It also increased subsidies for electric two-wheelers and made budgetary commitments for the development of EV manufacturing and battery supply capacity. Considering the positive outlook for the automobile industry, in the long run, investors can benefit from the growth of EVs and AVs by investing in segments that capture the EV/AV value chain, including EV and AV manufacturers, EV battery producers, EV battery material suppliers, and EV and AV technology enablers.
Mirae Asset Mutual Fund has launched Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund. It is an open-ended fund of fund scheme investing in overseas equity Exchange Traded Funds which are based on companies involved in the development of Electric & Autonomous Vehicles and related technology, components and materials.
On the launch of this fund, Mr Swarup Mohanty, CEO at Mirae Asset Investment Managers (India) Private Limited said, “Mirae Asset has been at the forefront of introducing global investment products for Indian investors. We are at a nascent stage of the evolution of the Electric & Autonomous Vehicles theme in India, but globally this theme is taking centre stage, we believe introducing this fund to investors would offer them a chance to participate in the global theme. We want to bring the experience of investing in unique global offerings to Indian investors at an opportune time to make their investment horizon broad-based and relevant in the investment cycle of investors at large.”
Table 1: Details of Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund
|An open-ended fund of fund scheme investing in overseas equity Exchange Traded Funds which are based on companies involved in the development of Electric & Autonomous Vehicles and related technology, components and materials.
|Fund of Fund (Overseas)
|The investment objective of the scheme is to provide long-term capital appreciation from a portfolio investing in units of overseas equity ETFs which are based on companies involved in the development of Electric & Autonomous Vehicles and related technology, components and materials. There is no assurance that the investment objective of the Scheme will be realized.
|Rs 5,000/- and in multiples of Re 1/- thereafter. Additional Purchase Rs 1,000/- and in multiples of Re 1/- thereafter.
|Rs 10/- per unit
|Mr Siddharth Srivastava
|Solactive Autonomous & Electric Vehicles Index (TRI) (INR)
|August 16, 2022
|August 30, 2022
(Source: Scheme Information Document)
The investment strategy for Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund will be as follows:
Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund aims to provide long-term capital appreciation from a portfolio by investing in units of overseas equity ETFs which are based on companies involved in the development of Electric & Autonomous Vehicles and related technology, components and materials.
The investment strategy is to passively invest in companies which are involved in the development of Electric & Autonomous Vehicles and related technology, components and materials across geographies. This includes companies that produce electric, hybrid and autonomous vehicle components which are used in the building of the vehicle, including batteries, fuel cells, car components, communication equipment, Electronic Components, software, communication services, semiconductor, electrical and power equipment, chemicals, raw materials including metal mining and products (for example lithium, cobalt etc.), sensors, mapping, artificial intelligence, Advanced Driver Assistance Systems, ride-share platforms and network-connected services for transportation.
The scheme may invest in multiple ETFs which are listed in different countries and track companies from different geographies. The scheme may invest in the units of ETFs through the exchange on which the ETF is listed, through the asset management company which is managing the ETF, through an authorized participant, market marker or any other available counterparty.
Here’s a list of underlying ETFs in which the scheme shall invest:
GlobalX is a leading ETF provider headquartered in New York, and presently manages more than the US $40 billion AUM in thematic ETFs. Global X ETFs is a member of Mirae Asset Financial Group.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund
|Indicative Allocation (% of net assets)
|Units of overseas equity Exchange Traded Funds
|Money market instruments including Tri-Party REPO/ debt securities, Units of debt/liquid schemes of domestic Mutual Funds
|Low to Medium
(Source: Scheme Information Document)
About the benchmark
The Solactive Autonomous & Electric Vehicles Index tracks the price movements in shares of companies which are (or are expected to be in the near future) active in the electric vehicles and autonomous driving segments. This particularly includes electric vehicle manufacturers, electric vehicle component producers, companies that mine or produce raw materials that are relevant to the electric vehicle and autonomous vehicle technology segment, companies that build autonomous vehicles, and suppliers of autonomous vehicle technologies.
Who will manage Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund?
The designated fund manager for this scheme will be Mr Siddharth Srivastava. He holds an MBA (Tech) and BTech degree and has an overall experience of 11 years in the field of financial services and stock markets. Prior to joining Mirae AMC, he was Senior Manager at NSE Indices Limited and was associated as Senior Associate at Morgan Stanley Capital International.
Fund Outlook – Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund
Mirae Asset Global Electric & Autonomous Vehicles ETFs Fund of Fund seeks to invest in overseas equity ETFs which are based on companies involved in the development of Electric & Autonomous Vehicles and related technology, components and materials.
The scheme invests in a secular growth trend to take advantage of the irreversible shift towards electric and autonomous vehicles. It endeavours to provide exposure to the entire ecosystem of Electric and Autonomous Vehicles, from Mining to Vehicle Manufactures. The scheme offers investors a well-diversified portfolio with exposure to companies from multiple countries catering to the theme.
Being an overseas Fund of Fund scheme, it has a low correlation to the Indian equity market and invests in unique global themes. Since the scheme follows a passive approach, it is available at lower costs and reduces the risk of active stock selection risk.
However, do note that the scheme will invest a majority of its assets passively in international equities, which are risky in nature. The scheme will also be prone to geopolitical risk, and currency risk, and may face higher volatility due to dynamic global market conditions. It is a thematic Fund of Fund scheme, that will focus on investing in companies only under the new-age automobile segment, which creates concentration risk. The fortune of this scheme will depend on the performance of the underlying ETFs.
Additionally, the persistent repercussions of the Russia-Ukraine conflict, the rise in global interest rates, and spiralling inflation around the globe may pose a significant risk to economic growth. These factors, among many others, could have a bearing on the underlying ETF’s performance and may affect the scheme’s portfolio negatively if the sector moves out of favour.
Therefore, this scheme is a high-risk high-return investment proposition and suitable for investors possessing a decent understanding of the new-age automobile segment and an investment horizon of at least 5-7 years.
This article first appeared on PersonalFN here