Quantum Mutual Fund launches India’s first Nifty 50 ETF Fund of Fund

Quantum Mutual Fund launches Quantum Nifty 50 ETF Fund of Fund (FoF), an open-ended FoF scheme that will be investing in the units of Quantum Nifty 50 Exchange Traded Fund. This is India’s first Nifty 50 FoF.

The new fund offer opens on July 18, 2022, and closes on August 1, 2022. The scheme will re-open for subscription and redemption on an ongoing basis from August 10, 2022. The scheme will be benchmarked to NIFTY 50- Total Return Index.

Quantum Nifty 50 ETF has a track record of over 14 years. Hitendra Parekh has been the fund manager since its inception on July 10th, 2008. The tracking error of this ETF in the last three years, as per Ace MF, is in line with the category average of Nifty 50 ETFs in the market at 0.1%.

Comparing the FoF route to an ETF and index fund route of passively investing, Chirag Mehta, CIO- Quantum Mutual Fund said “Index funds offer you the convenience of SIP, however, come at a higher cost than ETFs generally. And secondly, given the structure of index funds, fund managers find it inconvenient to replicate the index entirely when there are lower inflows into the fund, which results in higher tracking error. Therefore, I think, while the best option still is ETF, from a convenience and efficiency perspective, ETF FoF route is good.

Quantum Nifty 50 ETF FoF will have an expense ratio of about 15 basis points for a direct plan and about 27 basis points for a regular plan. To put it in perspective, this expense ratio is at the lower end of the expense ratio range of the existing Nifty 50 index funds.

Rushabh Desai, founder of Rupee With Rushabh Investment Services, said “investors can skip investing in the fund at the current moment given there are enough good Nifty 50 index funds with good track record at low cost and tracking error already in the market.”