Goldman Nifty ETF lags peers after Benchmark acquisition

Tags: Mutual Funds

The fund gives 1.2 per cent return against 2.9 per cent of peers

Mutual fund investors run the risk of the performance of their schemes getting adversely affected when the asset management company (AMC) managing their schemes gets taken over by another AMC or see significant stake changes. At times, in real life, this risk does unveil itself, as investors in the first-ever exchange traded fund (ETF) launched a decade ago have been discovering lately.

When Benchmark Mutual Fund launched its Nifty Exchange Traded Scheme (Nifty ETF) in 2002, it was the first ETF in the country. The mutual fund’s investment manager, Benchmark Asset Management Company (BAMC) was taken over by the Goldman Sachs group with effect from July 14, 2011, and was effectively run by Goldman Sachs since then.

For one month BAMC stayed as a distinct company but as a part of the Goldman Sachs group. From August 22, 2011, Goldman Sachs Asset Management (India) formally took over the management of all the schemes managed by BAMC. But post mid-July, the performance of its most popular scheme, Nifty ETF, has, for the most time in its decade-old history, under-performed the underlying benchmark index as well as its peer schemes.

This was revealed in an FC Research Bureau analysis comparing the performance of GS Nifty ETF before and after the July 2011 acquisition with that of Nifty Total Returns Index (Nifty TRI) and two of its Nifty ETF peer funds – Quantum Index Fund-Nifty ETF and Kotak Nifty ETF.

From the average of its net asset values (NAVs) of July 4 to July 13 last year to the average of its NAVs in the current month till November 9, GS Nifty ETF has given an absolute return of 1.20 per cent, below that of corresponding Nifty TRI’s return of 3.14 per cent, Quantum Nifty ETF’s 2.95 per cent and Kotak Nifty ETF's 2.85 per cent.

The was not the case in the earlier comparable periods. In the one-year period up to mid-July last year, GS Nifty ETF’s return of 5.91 per cent was in sync with Nifty TRI’s 6.16 per cent and a little ahead of Quantum Nifty ETF’s 5.63 per cent and Kotak Nifty ETF’s 5.82 per cent. The previous one-year period from July 2009 to July 2010 also saw the same pattern (see chart).

Post-expenses, index-linked ETFs are supposed to mirror the returns of the underlying index’s total returns values which includes the impact of dividends received from the member-companies of the index. The expense ratios range from 0.2 per cent to 0.5 per cent in the case of Indian mutual fund industry’s ETFs.

A month before the Goldman Sachs acquisition of Benchmark MF, Benchmark Nifty ETF had a corpus of Rs 533 crore in June 2011. In September this year, the average corpus of (rechristened) GS Nifty ETF was Rs 563 crore.

Interestingly, in other comparable performance records of Goldman Sachs India MF’s ETFs, no under-performance was seen. As per NAV data from Capitaline NAV, GS Bank ETF and Reliance Banking ETF, both linked to CNX Bank index, the absolute return from July 13 last year to November 9 this year was the same – 4.36 per cent. Another ETF, linked to CNX PSU Banks index, the GS PSU Bank ETF has given a negative return of 15.2 per cent, which is better than peer Kotak PSU Bank ETF’s negative return of 16.10 per cent.


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