Axis MF has launched S&P 500 ETF Fund of Fund where it would be replicating / tracking S&P 500 TRI. This fund would open for subscription on 22nd March and would close on 5th April, 2023. When US stock markets underperformed in the last 1 year, is this a good opportunity to invest in such funds? In this article, we would provide Axis S&P 500 ETF Fund of Fund NFO issue details and whether you should invest or avoid.
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Axis S&P 500 ETF Fund of Fund – NFO issue details
This is an open-ended mutual fund equity scheme.
|Scheme reopens for continuous purchase/sale||Within 5 business days|
|Minimum Lumpsum||Rs 500|
|Minimum SIP||Rs 500 for 12 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||0.25% for redemption within 30 days|
|Benchmark||S&P 500 TRI|
|Fund Manager||Vinayak Jayanath|
What is the investment objective of Axis S&P 500 ETF FoF NFO?
To replicate the performance of the S&P 500 TRI by investing in Exchange Traded Funds replicating S&P 500 TRI, subject to tracking errors.
What is the allocation pattern in this mutual fund scheme?
Here is the allocation pattern of this scheme.
|Type of instruments||Min %||Max %||Risk Profile|
|Units / shares of Exchange Traded Funds
replicating S&P 500 TRI
|Debt, Money market instruments and / or units of
|0%||5%||Low to Moderate|
How S&P 500 Index performed in the last 5 to 10 years?
Here are the total returns (price return + dividend yield) in USD terms and in INR terms (since rupee has fallen in the last few years)
In USD Terms
- 1 year return – minus 9.6%
- 3 year annualised return – 17.5%
- 5 year annualised return – 9.2%
- 10 year annualised return – 11.7%
In INR Terms
- 1 year return – minus 1.7%
- 3 year annualised return – 21.8%
- 5 year annualised return – 14.5%
- 10 year annualised return – 16.6%
Why to invest in the Axis MF S&P ETF FoF?
Here are a few reasons to invest in this fund.
1) The S&P 500 index in the US is widely regarded as the best single gauge of large cap US equities. The index is designed to measure the performance of the leading 500 companies listed in the United States and covers approximately 80% of available market capitalization.
2) S&P 500 Index has low correlation Indian stock market. This would help for diversification of your portfolio.
3) S&P 500 Index companies have global exposure in terms of sales. This would help not concentrate on domestic sales alone.
4) S&P 500 index dividend yield is stable in the last 5 years. Its current indicative yield is 1.7% in 2023.
5) Indian investors can benefit from dollar hedge / USD appreciation by investing in such global mutual funds. This can be seen clearly in the index performance in USD Vs. INR terms.
Why should you avoid Axis MF S&P ETF Fund of Fund NFO?
One should consider some of these risk factors / negative factors before investing.
1) This fund is from Axis MF where some of its fund managers are involved in the scam of front running and Axis MF have suspended these fund managers few months back. Axis MF had poor performance across mutual fund schemes in the last 1 year which we have covered as part of the earlier article.
2) The risk of investing in foreign securities carries an exchange rate risk related to depreciation of foreign currency and country risks.
3) The Scheme shall invest in securities listed on the overseas stock exchange. Hence, all the risk factors pertaining to overseas stock exchange like market trading risk, liquidity risk and volatility risk, as mentioned earlier, are also applicable to the Scheme.
4) We are seeing global recession and could see stock markets falling in the last 1 year. Such recession might take a year or two to recover and go in the growth path.
Also Read: 5 Debt funds with highest SIP Returns
Should you invest in Axis S&P 500 ETF Fund of Fund NFO?
Axis S&P 500 ETF FoF is a global MF scheme that invests in the S&P 500 index. This index has performed moderately in the medium to long term and generated 9% to 11.7% in USD terms and 14.5% to 16.6% in INR terms in the last 5 to 10 years. Such funds are good for portfolio diversification and for international exposure.
On the other side, this index has generated moderate returns in USD terms. Investors should not carry away with INR terms as one cannot expect rupee depreciation in the future (which is unknown).
High risk investors who are looking for international exposure and portfolio diversification and willing to invest for a medium to long term can invest in such index funds.
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