HDFC MF Announces Launch Of Three Smart Beta ETFs, Subscriptions Open On September 9

HDFC Mutual Fund will offer investors the option of investing in three smart beta exchange-traded funds (ETFs) – HDFC NIFTY100 Quality 30 ETF, HDFC NIFTY50 Value 20 ETF, and HDFC NIFTY Growth Sectors 15 ETF.

The stock selection in these exchange-traded funds (ETFs) will be based on factors rather than market cap.

How These ETFs Compare With Each Other?

HDFC NIFTY 100 Quality 30

There will be maximum 30 stocks chosen from NIFTY 100, which are in the future and options segment, too, and have a listing history of more than one year. The metric which is used to define this factor (quality 30) is return on equity (ROE), debt/equity (D/E) and 5-year EPS growth variability (EGV). 

Also, the 30 stocks in the ETF’s portfolio will be from NIFTY 100, based on their Quality Score. This ETF’S portfolio will be reviewed semi-annually in June and December.

The proposed expense ratio for this particular ETF will be 30 basis points or 0.3 per cent of assets under management (AUM) without taxes and charges, but this is subject to change later.

Each creation unit size will consist of 150,000 units of the ETF, and 1 ETF unit will be equal to 1/100 th of the value of the NIFTY 100 Quality 30 index.

HDFC NIFTY50 Value 20 ETF

There will be maximum 20 companies in this ETF’s portfolio, and they all will be in ascending order of their final ranking. 

This ETF will aim to buy undervalued stocks on the metrics of price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, dividend yield, and return on capital employed (ROCE).

The portfolio will be reviewed annually in December. 

Only those companies which are IRDA dividend norm compliant will be eligible as the portfolio stocks for this ETF.

The proposed expense ratio for this particular ETF will be 15 basis points (0.15 per cent), excluding GST and other taxes. However, this expense ratio could change depending on the funds collected by the ETF.

Each creation unit size will consist of 50,000 units of the ETF, and 1 ETF unit will be equal to 1/100 th of the value of the NIFTY50 Value 20 index.

HDFC NIFTY Growth Sectors 15 ETF

This particular ETF will have 15 stocks only, and they will be ranked by free float market cap (FFMCap), and EPS growth frequency.

The stocks will be selected semi-annually in March and September, while the sector selection will be done bi-annually in March. Only those stocks which also trade in the future and options segment, have a positive EPS, and are also IRDA dividend norms compliant are eligible for this ETF’s portfolio.

This ETF aims to construct its portfolio with companies which have a consistent profit growth. So, if investors check the historical returns, it might turn out to be more volatile than others. That said, the long-term returns are on the higher side. 

The proposed expense ratio for this ETF will be 0.3 per cent, excluding GST and other charges, but it is subject to change depending on the AUM size of the fund.

Each creation unit size will consist of 60,000 units of the ETF, and 1 ETF unit will be equal to 1/100 th of the value of the NIFTY Growth Sectors 15 index.

Krishan Kumar Daga, senior fund manager, said that the sector concentration for this particular ETF will be FMCG, automobiles and healthcare.

Subscription Process

All these ETFs will be passively managed. The minimum subscription amount for these ETFs is Rs 500. These schemes will open from September 9 and run till September 20. 

Since these are ETFs, you will need a demat account for transaction. You will also need to have some knowledge of the market, as ETF trades in much the similar way as stocks, and the net asset value (NAV) of the ETF revolves according to the changing market conditions by the second.