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Designed to provide broad exposure to the Asia-Pacific (Emerging) ETFs category of the market, the First Trust India NIFTY 50 Equal Weight ETF (NFTY) is a smart beta exchange traded fund launched on 02/14/2012.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. NFTY has been able to amass assets over $236.05 million, making it one of the average sized ETFs in the Asia-Pacific (Emerging) ETFs. NFTY, before fees and expenses, seeks to match the performance of the NIFTY 50 EQUAL WEIGHT INDEX .
The NIFTY 50 Equal Weight Index is an equally weighted index that tracks the performance of the 50 largest and most liquid Indian securities listed on the National Stock Exchange of India.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.80% for NFTY, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 1.25%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Looking at individual holdings, Indian Rupee ($INR) accounts for about 4.67% of total assets, followed by Bajaj Finance Limited (BAF.IS) and Maruti Suzuki India Limited (MSIL.IS).