ICICI Prudential Mutual Fund announced the launch of the ICICI Prudential Nifty PSU Bank ETF, an open-ended exchange-traded fund (ETF) tracking the Nifty PSU Bank Index constituents.
The scheme opened for public subscription on March 13, 2023, and will close on March 15, 2023, and will re-open for ongoing subscription and redemption within five business days from the date of allotment of units.
Q. What kind of mutual fund scheme is this?
This kind of open-ended exchange-traded fund (ETF) scheme aims to generate returns by investing in a basket of Nifty PSU Bank Index stocks and aims to achieve returns of the stated index, subject to tracking error. The product is apt for investors seeking long-term wealth creation solutions.
Q. What is the main objective of investing in this fund?
The investment objective of the scheme is to provide returns before expenses that correspond to the total return of the underlying index subject to tracking errors.
• Robust Demand – Banks intermediate by accepting deposits and lending money to those in need thereby facilitating optimum utilization of scarce resources
• Economic Growth – PSU Banks have effectively captured the GDP growth of the country due to it being a beneficiary from all sectors of the economy
• Improving Asset Quality – Asset quality is improving due to reforms which may lead to risk reduction and higher returns
• Low Capital Requirement – For a minimum investment amount of ₹1000, an investor gets the opportunity to invest in most of the biggest banks in the country
However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.
Q. How may one invest in this scheme?
Investors can invest under the scheme with a minimum investment of Rs1000 per plan/option and in multiples of Re 1. There is no upper limit for investment.
Speaking on the launch of the product, Chintan Haria, Head–Investment Strategy, ICICI Prudential AMC said, “Over the past decade, PSU banks have undergone a transformation on account of their improving efficiency, customer-centric approach, technological superiority and improving risk management frameworks. As a result, since 2018, net NPAs have fallen by over 65 per cent while the capital adequacy ratio has risen by almost 15 per cent. This improvement is reflected in the equity market as well, with the Nifty PSU Bank TRI delivering better returns than both Nifty 50 TRI and Nifty Bank TRI over the last few years.”
Under normal circumstances, the asset allocation of the scheme will be as follows:
|Instruments||Indicative allocations (% of total assets)||Risk Profile|
|Equity and Equity related securities of companies constituting the underlying index (NIFTY PSU Bank Index)||100||95||Very High|
|Money market instruments including TREPs||5||0||Low to Medium|
Q. Are there similar mutual funds in the market?
To date, many asset management companies have launched ETFs, thus, allowing inclined investors to avail of returns corresponding to the total returns of the securities in this particular index. These include:
|Name of the scheme||Three-year returns (in %)|
|Nippon ETF PSU Bank BeES||31.98|
|Kotak PSU Bank ETF||31.85|
|SBI - ETF Nifty Bank||14.91|
|Kotak Banking ETF||14.81|
Q. How will the scheme benchmark its performance?
The performance of the scheme would be benchmarked against Nifty PSU Bank TRI.
Q. Are there any entry or exit loads to this scheme?
This scheme involves no “Entry Load”, which means that investors do not have to pay anything to park their earnings in this scheme. The “Exit Load” is also “Zero”. However, during the process of creation/redemption, there may be transaction costs and/or other incidental expenses (forming part of the Cash Component), which are liable to be borne by the eligible investors.
Q. Who will manage this scheme?
Kayzad Eghlim and Nishit Patel will manage the investments under the scheme.
Q. Does the fund contain any inherent risk?
The scheme involves “Very High Risk” as per the details mentioned in the Scheme Information Document and is best suited to investors willing to understand that their principal will be subject to very high risk only. However, investors should consult their financial advisors if they doubt whether the product suits them.