India’s oldest ETF crosses 20 years of launch, gives 16% returns

Nippon India ETF Nifty is in BeES 5,113 crore assets (AUM) under management. It has given a return of 15.98 per cent since inception. Its expense ratio is only 0.05%. 1 lakh initially invested in ETF will now be worth 19.4 lakhs.

ETFs are low cost passive mutual funds that easily track an index like Sensex or Nifty. As more and more actively managed funds fail to outperform indices, investors prefer passive funds due to their lower costs. Investors in passive funds are willing to accept market returns rather than try to beat the market.

Passive investing was started in the US by John Bogle and passive funds now account for the majority of the mutual fund industry in the US. However, the share of mutual fund industry AUM in passive fund account in India is around 10%. In India, passive funds can take the form of ETFs, which are actively traded on an exchange. Alternatively, they can be index funds, purchased from fund houses, who manage them at the current NAV (Net Asset Value) rather than the market.

You need a demat and trading account to buy ETFs and their prices on stock exchanges may differ from their current NAV. The mutual fund industry has moved beyond equities into international indices such as the S&P 500, along with passive-space launching index funds and ETFs tracking debt.

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

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