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Advisor alpha focused product

Aditya Birla Sun Life AMC launches its Nifty Next 50 ETF

NFO Period: Dec 11 – 17, 2018

Activity in the ETF space is heating up, and the latest to join the action is ABSL, with the launch of its Nifty Next 50 ETF. Commenting on the launch, A. Balasubramanian, CEO, ABSL AMC said: “The stocks comprising Nifty 50 and the Nifty Next 50 make up the 100 most liquid stocks within the large-cap universe. The Nifty Next 50 Index focuses on stocks that have the potential to grow and move to the top. This is hence a compelling proposition to tap into India’s growth story. It is also observed over a longer period of time, Next Nifty 50 companies tend to deliver better performance over the main indices given the nature of the size of companies and its future growth potential.”

Most distributors tend not to look at ETFs due the lack of adequate remuneration structures. But demand is nevertheless picking up steadily for ETFs – and its not just EPFO that’s driving it with its focus on Nifty 50 and Sensex ETFs. There seems to be a trend developing among wealth managers who have opted for the RIA model and who serve HNIs and semi-institutional clients, to look for cost effective products that can beat large cap indices (like Nifty 50 and Sensex). The Nifty Next 50 index comes in handy here, with its track record of outperforming its larger counterpart – the Nifty 50, and yet coming in a low cost wrapping of an ETF.

Costs will continue to be a key focus area, especially for large investors. Solutions like a Nifty Next 50 index fund and some simple smart beta options like equally weighted index funds – whether in the index fund or an ETF wrapper, are likely to see growing appetite from RIAs focused on demonstrating advisor alpha. As RIAs find low cost solutions to demonstrate advisor alpha, distributors will do well to consider how they might want to respond to what seems to be a nascent yet growing trend.

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