UTI Mutual Fund launched the new fund offer (NFO) of UTI Nifty 500 Value 50 Index Fund on April 26, 2023. The fund will track the Nifty 500 Value 50 Total Return Index and seek to generate returns in line with the index. The NFO will end on May 8, 2023. The minimum investment amount is Rs 5,000, followed by multiples of Rs 1.
As an open-ended scheme, the scheme will reopen for repurchase or sale on May 12, 2023. After the initial investment of Rs. 5000, the minimum investment amount is Rs.1,000 and in multiples of Re.1 after that.
Passive Index Funds
As UTI Nifty 500 Value 50 is an index fund, it comes under the passive investment category. Passive index funds only track their respective indexes and buy the same benchmark index stocks. It holds those stocks until the tracked index changes its portfolio. There is no frequent trading of stocks for short-term gain in passive funds. Therefore, the fund management fee is generally lower than that of actively managed funds. Here UTI Mutual funds have estimated that up to one per cent of the daily net assets of the scheme will be charged as expenses.
But passive index funds lose the service of an active fund manager trying to generate returns from stocks outside the index it tracks. Sharwan Kumar Goyal is the fund manager of UTI Nifty 500 Value 50.
Underling Index
The performance of UTI Nifty 500 Value 50 depends on the benchmark Nifty 500 value 50. UTI Mutual Funds promises "returns commensurate with the performance of the Nifty 500 Value 50 Index over the long term, subject to tracking error."
The index consists of 50 companies from the parent Nifty 500 index, selected according to their 'value scores', determined by earnings-to-price ratios, book-to-price ratios, and sales-to-price ratios.
Oil and Natural Gas Corporation (ONGC), Hindustan Zinc, Indian Oil Corporation (IOC), Gwalior Rayons and Silk Manufacturing (GRASIM) and Hindalco are some of the companies with the largest market capital in the Nifty 500 value 50.
Many asset management companies (AMCs) have introduced index fund schemes to track the top 500 or 50 companies based on total market capitalisation on Nifty. Many such funds provide returns above 20 per cent over the long term. Also, such funds offer interested investors alternatives to invest or an opportunity to track anticipated returns.
NFO Details
UTI Mutual Funds says that before investing in UTI Nifty 500 Value 50, investors should know that their principal investment should be at very high risk. This is because the scheme will invest at least 95 per cent of its assets in securities in the Nifty 500 Value 50 Index, considered high-risk investments. On the
other hand, a maximum of 5 per cent of assets in this mutual fund scheme will be invested in low-risk money market instruments.
An amount of Rs. 5 crore is targeted to be raised during the New Fund Offer Period of the scheme. Any over-subscription above Rs. 5 crore will be fully retained subject to regulatory limits. Entry and exit loads do not apply to the scheme.
The minimum SIP amount for daily, weekly and monthly SIP is Rs. 500 and in multiples of Re. 1 thereafter. The minimum SIP amount for Quarterly SIP is Rs. 1,500 and in multiples of Re.1 thereafter.
