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Making its debut on 02/14/2012, smart beta exchange traded fund First Trust India NIFTY 50 Equal Weight ETF (NFTY) provides investors broad exposure to the Asia-Pacific (Emerging) ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $270.64 million, which makes it one of the average sized ETFs in the Asia-Pacific (Emerging) ETFs. NFTY, before fees and expenses, seeks to match the performance of the NIFTY 50 EQUAL WEIGHT INDEX .
The NIFTY 50 Equal Weight Index is an equally weighted index that tracks the performance of the 50 largest and most liquid Indian securities listed on the National Stock Exchange of India.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.80%, making it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.61%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Tech Mahindra Ltd. (TECHM.IS) accounts for about 2.40% of the fund's total assets, followed by Wipro Limited (WPRO.IS) and State Bank Of India (SBIN.IS).