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The attractiveness of passive funds like ETFs hinges on two critical metrics: the expense ratio and tracking error. A low expense ratio means lower costs for investors, enhancing the fund's appeal by improving net returns. Similarly, a minimal tracking error ensures the ETF closely follows its benchmark index, crucial for matching market performance.
"The appointment of a single fund manager for domestic and overseas/commodity funds is intended to reduce the cost of managing the fund," Anand Rathi Wealth Ltd Deputy CEO Feroze Azeez said.
He talks to BT Money Today about the risks to individual investors and more
We considered the passive small cap schemes that are benchmarked against Nifty Smallcap 50 - TRI, and Nifty Smallcap 250 - TRI. These benchmarks offered 65.47% and 49.09% respectively. These small cap index schemes offered around 46-62% in 2023. The underperformance, as said earlier, was around 1.79-3.46%. (See table) We considered the regular and growth options.
The scheme will allocate 95-100% in equity and equity related securities of companies constituting the underlying index (Nifty50 Value 20 Index) and 0-5% in money market instruments including TREPs and units of debt schemes.