Publish Date:
Mirae Asset Mutual Fund has come up with a New Fund Offer (NFO) -- Mirae Asset Nifty MidSmallcap400 Momentum Quality 100 ETF - which will be open for subscription from May 6, 2024 to May 17, 2024.
During the NFO period, the minimum investment amount is Rs 5,000, per application and in multiples of Re 1 thereafter.
This is an open-ended scheme replicating/tracking the 'Nifty MidSmallcap400 Momentum Quality 100 Total Return Index'.
The Scheme would invest in stocks constituting the Nifty MidSmallcap400 Momentum Quality 100 Index in a similar proportion (weightage) as in the Index and endeavour to track the benchmark index. Moreover, the scheme may also take derivative instruments up to 20% of its net assets.
Also, up to 5% of its net assets could be allocated to money market instruments/debt securities, I and/or units of debt/liquid schemes of domestic mutual funds.
The investment objective of the scheme is to generate returns, before expenses, that are commensurate with the performance of the Nifty MidSmallcap400 Momentum Quality 100 Total Return Index, subject to tracking error. However, there is no assurance or guarantee that the investment objective of the scheme would be achieved.
Mirae Asset Nifty MidSmallcap400 Momentum Quality 100 ETF is first of its kind scheme that provides a focused approach exposure to both mid-cap and small-cap stocks selected based on the combination of momentum and quality factors from the Nifty MidSmallcap400 Momentum Quality 100 Index. It is a passively managed fund.
The investment strategy would revolve around reducing the tracking error to the least possible through regular rebalancing of the portfolio, considering the change in weights of stocks in the Index as well as the incremental collections/redemptions in the Scheme. A part of the funds may be invested in debt and money market instruments, to meet the liquidity requirements.
Note, that the Nifty MidSmallcap400 Momentum Quality 100 Index tracks the performance of the large and mid-cap stocks which are selected based on the combination of momentum and quality factors from the Nifty MidSmallcap 400 index.
Fifty companies from the mid-cap universe (stock forming part of the Nifty Midcap 150 index) and 50 companies from the small-cap universe (stock forming part of the Nifty Smallcap 250 index) based on the combination of momentum and quality factors are selected to be part of the index. Stocks that scored low on liquidity parameters are excluded from this index.
The quality score for each company is determined based on return on equity (ROE), financial leverage (Debt/Equity Ratio) and earnings (EPS) growth variability analysed during the previous 5 years. The momentum score for each company is determined based on its 6-month and 12-month price return, adjusted for volatility. The weight of each stock in the index is based on the combination of the composite momentum-quality score and its free-float market capitalisation. Stock weights are capped at 5% at the time of index rebalancing.
Table: Top constituents of the Nifty MidSmallcap400 Momentum Quality 100 Index
(Source: NSE Indexogram Factsheet as of April 2024)
Further, the Mirae Asset Nifty MidSmallcap400 Momentum Quality 100 ETF Fund of Fund will open for subscription on May 10, 2024, and close on May 24, 2024.
Siddharth Srivastava, Head - ETF Product and Fund Manager, in a press release said:
"We are excited to introduce a first-of-its-kind ETF and Fund of Fund for investors that focuses on both mid & smallcap companies, selected based on smart beta factors. The underlying portfolio targets highly profitable companies with low leverage and stable earnings growth which have given relatively higher risk-adjusted returns in the last 6-month and 1-year period. By investing in these funds, investors will get exposure to both mid and small-cap companies, but with a risk profile which has been historically more aligned to the midcap segment. At current market valuations, investors may invest in a lumpsum manner in ETF and FOF or through a Systematic Investment Plan (SIP) in FOF, but with a long-term investment horizon."
That being said, while small and mid-cap stocks have the potential to generate higher returns, the risk in these market cap segments is high. Only investors with a high-risk appetite and a longer investment horizon may consider such an investment proposition. The Small cap index particularly is near an all-time high and valuations seem more expensive than larger peers.
[Read: Small Cap Index Near an All-time High: Should You Rejoice or Worry?]
Even if you have a high-risk appetite it is imperative to approach Small Cap Funds as well as Mid Cap Funds sensibly rather than going gung ho now when there are several investment risks in play in 2024.
To know more about Mirae Asset Nifty MidSmallcap400 Momentum Quality 100 ETF download and read the Scheme Information Document and Key Information Memorandum.
Happy Investing!