India’s oldest ETF crosses 20 years since launch, delivers return of 16%

MUMBAI: Nippon India ETF Nifty BeES, India’s oldest ETF, has completed 20 years since its launch on 28 December 2001. The exchange traded fund (ETF) was originally launched as part of Benchmark Mutual Fund, which accounts for the BeES part of its name. Since then it has undergone three changes of ownership before ultimately finding a place in the basket of funds managed by Nippon India Asset Management Company (AMC). 

Nippon India ETF Nifty BeES has ₹5,113 crore worth assets under management (AUM). It has delivered a return of 15.98% since inception. It has an expense ratio of just 0.05%. ₹1 lakh invested in the ETF at inception would now be worth ₹19.4 lakh.

ETFs are low-cost passive mutual funds which simply track an index like the Sensex or Nifty. As more and more actively managed funds fail to beat indices, investors tend to prefer passive funds on account of their lower costs. Investors in passive funds are willing to accept the market return rather than trying to beat the market. 

Passive investing was pioneered by John Bogle in the US and passive funds now account for a majority of the mutual fund industry in the US. However, passive funds account in India account for a much lower share of mutual fund industry AUM at about 10%. In India, passive funds can take the form of ETFs, which are actively traded on an exchange. Alternatively, they can be index funds which are bought from the fund house managing them at the prevailing NAV (net asset value), rather than from the market. 

You need a demat and trading account to buy ETFs and their prices on stock exchanges can diverge from their prevailing NAV. The mutual fund industry has moved beyond equity in the passive space launching index funds and ETFs tracking debt as well as international indices such as the S&P 500.

If you count both index funds and ETFs, the index funds of UTI and Franklin precede Nippon India ETF Nifty BeES. They were launched in March and August 2000 respectively

Benchmark Mutual Fund was acquired by Goldman Sachs Asset Management in 2011. Goldman Sachs AMC was in turn acquired by Reliance Capital AMC (part of the Anil Dhirubhai Ambani Group or ADAG) in 2015. Reliance AMC eventually became Reliance Nippon AMC, as Nippon Life of Japan progressively hiked its stake in the asset manager. In 2019, the ADAG group sold its remaining stake to Nippon and the fund house was renamed as Nippon India AMC.