The Mirae Asset Nifty Midcap 150 ETF would launch its New Fund Offer (NFO) on February 24. The fund will be managed passively with investments in stocks in the same proportion as in the Nifty Midcap 150 Index. The scheme leaves open some scope of investing a part of the funds in debt and money market instruments to meet the liquidity requirements.
The scheme’s investment objective is to generate returns which are commensurate with the performance of the Nifty Midcap 150 Total Return Index subject to tracking error.
Why should investors invest?
The fund house beckons investors to invest by projecting it as an opportunity to participate in entire midcap segment of the market. The portfolio of companies with robust business models and the potential to become tomorrow’s large caps. Also, this is a relatively low-cost option to participate in midcap segment of market.
The average mid cap’s earnings, asserts asset management company (AMC), grow at a faster rate than large cap as well as average small-cap with less volatility and risk compared to small caps. It can be seen from the graph below:
The fund house projects this scheme as an investment opportunity to participate in companies which could be potentially emerging blue chips of future. The AMC says that the midcap 150 index has delivered better returns than Nifty 100 on a rolling return basis for a three years investment horizon.
Also, the index delivered better returns and return to risk than Nifty 50 and Nifty 100 in past 1,3, 5, 7, 10 and 15 years.
To make a case for the Nifty midcap 150 index, the AMC argues that actively managed funds are finding it difficult to outperform the Nifty midcap 150 index with 95 percent of midcap funds underperforming the index in past seven years.
The fund — with over three years of investment horizon — will target wealth creation and is suitable for investors who are seeking returns that align with the performance of the Nifty Midcap 150 index and are looking forward to investment in equity securities covered by the Nifty Midcap 150 index.
The top constituent stocks of midcap 150 index are given below in the following chart:
The minimum investment amount during the NFO is ₹5,000 and in multiples of Re 1 thereafter. The allotment will be done on March 9 and within five days, the ETF will be listed on the exchange.
The fund house’s expense ratio is 0.05 percent.
The NFO would close on March 4, but investors must remember that regardless of how tempting the scheme appears — investments are subject to market risks and one must read the scheme-related documents carefully!