ICICI Prudential Mutual Fund’s S&P BSE 500 Exchange Traded Fund (ETF) has opened for subscription 3rd May 2018 and will close on 7th May 2018. The fund will track the S&P BSE 500 Index and will be mandated to invest 95% of its assets in companies forming part of the S&P BSE 500. The AMC shall endeavour to ensure that the tracking error of the scheme does not exceed 2% per annum. Tracking error is a deviation of the fund’s return from that of the underlying index.
As of 30th April 2018, the S&P BSE 500 has delivered a total return CAGR of 16.91% over the past five years and 9.65% over the past 10 years. Total return includes price growth as well as dividends and assumes that these have been invested back in the index. CAGR or compounded annual growth rate is a method of measuring annualised growth over a period of several years.
The S&P BSE 500 consists of the top 500 companies listed on the BSE in proportion to their market capitalization and adjusted for free-float. Market capitalisation is the ‘size’ of a company, the value of each share of the company multiplied by the price of the share. Free-float reduces the market cap to account for shares that are not readily available for trading such as promoter and government holding. The S&P BSE 500 captures more than 95% of the market capitalisation of listed companies on the BSE.
The ETF will be managed by Kayzad Eghlim who manages other ICICI ETFs such as Nifty, Sensex and Bharat 22. The fund manager’s role is pretty small in an ETF compared to an actively managed equity fund.
ICICI Prudential AMC already has six equity ETFs tracking the Nifty, Sensex, Nifty 100, Nifty 50 Value Index, S&P BSE Midcap Select Index, Nifty 100 Low Volatility Index and the famous Bharat 22 ETF. The AMC also has a gold ETF, tracking the price of gold.
Who to buy the ETF from?
The minimum subscription amount for the ETF is Rs 5,000. You can submit an application form to the AMC to buy the ETF.
After the NFO is over, investors cannot directly buy or sell the ETF from the fund unless they trade in the ‘creation unit size.’ ICICI Prudential AMC has specified this to be 220,000 units. Thus, for example, if the NAV is Rs 20, you can only transact with the AMC in lots of Rs 44 lakh. An exception to this rule occurs if certain conditions relating to lack of liquidity or persistent drop in trade price below the ETF’s NAV are met.
You can, however, buy and sell units of the ETF on a stock exchange at any time after the NFO period. You would need a trading and demat account for this purpose.
NFO Period: 3rd May to 7th May, 2018
Minimum subscription amount: Rs 5000
Fund Manager: Kayzad Eghlim
Term: Open ended