ICICI Prudential MF launches Midcap 150 ETF: Is the fund suitable for you to invest?

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Updated: Jan 16, 2020 5:52 PM

The NFO period is from January 15 to January 20, 2020, during which you may invest minimum Rs 5,000 and in multiples of Re 1 thereafter.

Mutual Fund, MF, Exchange Traded Fund, ETF, new fund offer, NFO, ICICI Prudential Midcap 150 ETF, Expense Ratio, benchmark index, Nifty Midcap 150 Index, market risk, tracking error risk, portfolio concentration risk, volatility risk, liquidity riskAn Exchange Traded Fund (ETF) replicates composition of the underlying benchmark index in its portfolio.

ICICI Prudential Mutual Fund has launched its new fund offer (NFO) ICICI Prudential Midcap 150 ETF with the objective of closely tracking the benchmark index – Nifty Midcap 150 Index, and provide similar return generated by the index subject to tracking errors and fund management expenses.

As an Exchange Traded Fund (ETF) replicates composition of the underlying benchmark index in its portfolio, such funds are called passive funds and hence have lower expense ratio than actively managed funds.

“One of the biggest advantages of ETF’s over MF’s is the lower Expense Ratio. Average Expense Ratio of Midcap MFs in India is 2.25 per cent per annum, in comparison, the average expense ratio of ETF’s is 0.40 per cent per annum. ETF’s are traded like stocks, so investors trading in ETF’s will have to pay brokerage on every transaction,” said Abhishek Bansal, Chairman and Managing Director, Abans Group of Companies, adding, “ETFs also do not have exit load like Equity MFs.”

As ICICI Prudential Midcap 150 ETF is an open-ended fund, to provide adequate liquidity, it is proposed to be listed in both BSE and NSE, where the investors may buy or sell minimum 1 unit of the fund during trading hours. The units of the fund may also be bought directly from ICICI Prudential Mutual Fund (MF) or redeemed directly with it.

The NFO period is from January 15 to January 20, 2020, during which you may invest minimum Rs 5,000 and in multiples of Re 1 thereafter. During ongoing/continuous offer, you may buy or sell 1 unit or in multiples of 1 unit either through stock exchanges during trading hours or directly through ICICI Prudential MF.

“This Scheme is suitable for investors seeking for higher returns. The performance of the Scheme would be benchmarked against Nifty Midcap 150 TRI and Kayzad Eghlim is a good Fund Manager.,” said Ankit Agarwal, MD, Alankit Ltd.

As MF investments are subject to market risks, this fund would also face risks like – market risk, tracking error risk, portfolio concentration risk, volatility risk, liquidity risk etc.

“The ETF being at moderately high risk is created with a purpose to generate long term wealth. Investment can be made for five years or above, investors to expect gains that comfortably beat the inflation rate and are also higher than fixed income options,” said Agarwal.

You should also keep in mind that investing in Midcap stocks are more risky than investing in Largecap stocks. So, you should opt to invest in the fund only if you have high risk appetite.

“Investors must be prepared for ups and downs in market prices while making investments,” said Agarwal, adding, “Take risk, invest and watch your money grow.”

However, the performances of Midcap, Smallcap, as well of large number of Largecap stocks were not so so good last year, as market rallies was fuelled by only a handful of top stocks. So, is it the right time to invest in Midcap funds?

“The Midcap segment has shown good signs of recovery. On a year-on-year basis, the returns are almost flat but returns in Midcap Indices in the last three months is almost 12 per cent. We are very positive about the Midcap segment. As per a Bloomberg consensus, estimated growth in the Midcap segment for the next two years is 20 per cent and 19 per cent respectively,” said Bansal.

“Our Recommendation is to invest in “ICICI Prudential Midcap 150 ETF”. An investor with a mid to long term investment horizon should invest in this NFO,” he added.

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