When many actively-managed equity funds, especially small- and mid-cap funds, have generated negative returns during the last one year, a majority of index funds have generated handsome positive returns, mostly in the range of 4-7 per cent. Apart from outperforming the actively-managed peers, index funds also have the advantage of lower expense ratio as such funds don’t actively manage their portfolios, but replicate the folio of their respective benchmark indices. This is why the index funds are also known as passive funds.

“Index funds have low management cost as compared to any actively managed funds and such funds are also free from the fund managers biases,” said Financial Coach & Corporate Trainer Prof. Rahul Ranjan.

“In short term, actively managed funds can outperform their chosen benchmark, but studies have proved that in very long term, Index funds have outperformed actively managed funds,” Ranjan further said.

With the increase in craze for index funds in India, Axis Asset Management Company (AMC), whose actively managed flagship ELSS fund – Axis Long-Term Equity Fund has convincingly outperformed even many heavy weights in last one year with over 9 per cent positive return, has announced launch of Axis Nifty 100 Index Fund.

The NFO period of the open-ended index fund will be from September 27 to October 11, 2019, in which minimum Rs 5,000 and thereafter in multiples of Re 1 may be invested. The minimum amount for additional investment is Rs 1,000 and in multiples of Re 1 thereafter.

There will be no entry load, but 1 per cent exit load will be charged if units are redeemed within 7 days from the date of investment.

As the name suggests, the benchmark of the fund will be Nifty 100 index, which consists of large cap companies spread across 16 industries.

Managed by Ashish Naik, the fund aims to provide returns before expenses that closely corresponds to the total returns of the NIFTY 100 subject to tracking errors. However, there can be no assurance that the investment objective of the Scheme will be achieved.

Under normal circumstances, 95 to 100 per cent of the allocation will be in stocks comprising Nifty 100, while debt and money market instruments would comprise of 0 to 5 per cent of the fund’s portfolio.

Although, the fund will predominantly invest in large-cap stocks, which are considered less risky than mid- and small-cap funds, but the investors should keep in mind that Axis Nifty 100 Index Fund is not a guaranteed or assured return scheme and the return of the fund will depend on performance of the stocks comprising its portfolio.

As Nifty 100 is a broader index as compared to the more popular Nifty 50 and has outperformed the NIFTY 50 Index in 8 out of the last 10 financial years, there is good probability to earn superior return than the return that other investment avenues may provide in long term.

So, if you have risk appetite, you may invest in this fund to fulfill long-term goals.

“If you are a proactive and seasoned investor, I will suggest to invest in actively managed funds. But if your time horizon is very long, say for more then 20 years, then definitely, I will suggest you to go for index funds,” said Ranjan.

Stressing on long-term prospect of the fund, Chandresh Kumar Nigam, MD & CEO, Axis AMC said, “We believe that, there are a lot of opportunities in the market for long-term investments and the Axis Nifty 100 Index Fund will help investors seek significant wealth creation opportunities.”