With the equity benchmark indices Sensex and Nifty making record highs day after day, a few passive mutual funds in India have returned more than 40% since January. Interestingly, these passive funds have low expense ratios too, which may help the investors to achieve better returns. Another important aspect to note about these funds is that they don’t aim to beat their respective benchmarks, but look to mimic the underlying index. For example, ICICI Prudential Next 50 Index Fund’s investment objective says, “The investment objective of the Scheme is to invest in companies whose securities are included in Nifty Next 50 Index (the Index) and to endeavor to achieve the returns of the above index as closely as possible, though subject to tracking error. The Scheme will not seek to outperform the Nifty Next 50. The objective is that the performance of the NAV of the Scheme should closely track the performance of the Nifty Next 50 over the same period subject to tracking error.” We take a closer look at two best performing passive mutual funds since January this year, according to data from Value Research.
SBI ETF Nifty Next 50 is a top performing passive fund with returns greater than 43% since January. According to Value Research ratings, the fund is ranked 6th out of 117 funds in the same Equity Multi-cap category. Notably, the fund size is at Rs 5 crore as on 30th September 2017. According to the company’s website the fund has an expense ratio of 0.2%. “The investment objective of the scheme is to provide returns that, closely correspond to the total returns of the securities as represented by the underlying index, subject to tracking error. However there is no guarantee or assurance that the investment objective of the scheme will be achieved,” reads the investment objective of the fund.
ICICI Prudential Next 50 Index Fund is next on the list, which has returned more than 42% in the year so far, marginally outperforming the Nifty Next 50 Index which is up by more than 41% in the year. The expense ratio of the fund is 0.81%, lower than many other actively managed funds. Notably, some active funds such as Baroda Pioneer Large Cap Fund, IDBI India Top 100 Equity Fund and Baroda Pioneer Mid Cap Fund have expense ratios of more than 3%, while have returned less than 25% each in the last one-year period.
(First published on 7 November 2017 on www.financialexpress.com)