Edelweiss AMC’s two ETFs convert to index funds, effective today

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NEW DELHI: Edelweiss Asset Management Ltd on Thursday converted two of its exchange-traded funds (ETFs) – Nifty 50 ETF and Nifty 100 Quality 30 ETF – into Nifty 50 Index Fund and Nifty 100 Quality 30 Index Fund, respectively. The announcement of the changes was made in August.

Passive investing, which includes index funds and ETFs, has become important among new investors in India because it is the most basic form of investing money in mutual funds. Both instruments essentially reflect an index.

An index fund works like a mutual fund system, in which a fund manager creates a portfolio that replicates an index, which can be Sensex or Nifty. But index funds can only buy them on the basis of the net asset value (NAV) at the end of the day.

Edelweiss ETF-Nifty 50 was initially launched in 2015, while Edelweiss ETF – Nifty 100 Quality 30 debuted in 2016. As of August 31, they had assets worth ??3 crores and ??12 crore, respectively, under management.

With the recent changes, the Edelweiss Nifty 50 Index Fund will be compared to the Nifty 50 Total Return Index (TRI), and the Edelweiss Nifty 100 Quality 30 Index Fund will track the Nifty 100 Quality 30 TRI.

According to Niranjan Avasthi, head of product marketing and digital activities at Edelweiss AMC, the company is now focusing on index funds when filing new share programs.

“We have deposited our large and mid-cap financial services fund and launched a healthcare fund on the index platform because it provides easy access for retail investors. So these two funds (Nifty 50 ETF and Nifty 100 Quality 30 ETF) were quite old ETFs, and we thought converting them would be the prudent option, and most of our investors also indicated that they needed to index funds to set up SIP in these funds, ”Avasthi said.

Avasthi believes that with the change, they expect a significant increase in the number of investors in these two index funds.

According to experts, for most retail investors, index funds are a better option than ETFs because they are easily accessible. For index funds, investors do not have to open a demat account or pay brokerage fees. Additionally, most retail investors are expected to be long-term investors and not have to time the markets daily to purchase the Units.

Rushabh Desai, a Mumbai-based mutual fund distributor who prefers index funds over ETFs, says ETF prices can really fluctuate based on supply and demand and can trade at a premium over ETFs. at the real price of the underlying index.

“Retail investors who don’t understand the difference between the traded price and the actual price can end up buying ETFs at a premium, which is absolutely unnecessary for them. Index funds are easier to follow, they don’t require mat account and they are easier to buy and sell.On the other hand, we have seen a high level of institutional investor participation in ETFs, as these products are traded (which may help to reap the benefits of movements in intraday / short term market) and have a low expense ratio, but if some AMCs want good retail exposure, then index funds are the way to go, ”Desai added.

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