Edelweiss launches BSE LargeMid Stable Dividend ETF to capture Hybrid Market Growth
Edelweiss Mutual Fund has introduced the Edelweiss BSE LargeMid (60:40) Stable Dividend 50 ETF, a new Exchange Traded Fund (ETF). This product is designed for investors seeking long-term capital appreciation that aligns with the performance of its specified benchmark. The launch targets mid and large-cap stability by tracking the comprehensive BSE LargeMid (60:40) Stable Dividend 50 Total Return Index.The ETF operates as an open-ended scheme, directly replicating the index structure. It is suitable for investors looking to harness the combined potential of both large and mid-sized market companies while adhering to a stable dividend focus defined by the index construction methodology. The product carries a Very High risk rating for both the scheme and its benchmark, a classification prospective investors should note.
Investment Strategy and Objectives
The primary objective of this ETF is generating returns in line with the BSE LargeMid (60:40) Stable Dividend 50 Total Return Index, acknowledging that tracking errors are an inherent possibility. The scheme follows a purely passive or indexing approach; it will not attempt to outperform its benchmark nor make specific economic or financial judgments on individual stocks.The investment strategy dictates that the ETF invest no less than 95% of its assets in securities covered by the underlying Index and no more than 100%. A maximum allocation of 5% is permitted for money market instruments, cash equivalents, or units of liquid schemes. This structure aims to ensure the fund meets necessary liquidity requirements while maintaining high exposure to the core mandate.
The investment universe is strictly defined by the index methodology. The scheme must invest in stocks that are constituents of the BSE LargeMid (60:40) Stable Dividend 50 Total Return Index, maintaining the exact proportional allocation of the components. Additionally, the fund has strict restrictions prohibiting investments in any unlisted security of the Sponsor or associated companies.
Risk Profile and Mitigation Strategies
The ETF is subject to multiple risks inherent to indexing, equity exposure, and derivative use. Risks include general market risk due to volatile economic conditions and company-specific risk related to a firm's management or competitive standing. Liquidity risk applies if stocks with low trading volumes make it difficult to execute desired trades at fair prices.A key focus of the scheme is managing tracking error and tracking difference. These metrics measure any divergence between the fund’s portfolio returns and the Index performance. While these deviations are inevitable in an index fund, it is expected that the actual tracking error will not exceed 2% per annum from its Benchmark.
Risk mitigation strategies have been thoroughly established by the AMC. For example, concerning derivative use (up to 20% of net assets), the ETF mandates derivatives trading only on a recognized stock exchange with guaranteed settlement. The fund is committed to maintaining an optimal portfolio turnover commensurate with its objective and ongoing transactions.
Financial Structure and Operational Details
The cost structure for this scheme has been meticulously planned, with the Total Expense Ratio (TER) reflecting various operational expenses. The AMC has estimated that up to 0.90% of daily net assets will be charged as the Maximum Base Expenses Ratio (BER). This includes investment management fees and audit fees.Investors benefit from a clear structure regarding transaction costs. The units are compulsorily traded on stock exchanges, meaning there is currently no exit load applicable for secondary market transactions. However, investors must bear brokerage and bid/ask spread charges as charged by their broker.
Market accessibility for the units is comprehensive. The ETF is listed on the NSE and BSE, allowing continuous trading throughout the day like any other publicly traded security. While all retail transactions are conducted in dematerialized form, Authorised Participants (APs) and Large Investors retain flexibility to subscribe or redeem directly with the Fund/AMC within Creation Unit Size requirements.
Key Facts of Edelweiss BSE LargeMid ETF
| Attribute | Detail |
|---|---|
| Scheme Type | Open-ended Exchange Traded Fund (ETF). |
| Investment Objective | To generate returns that are in line with the performance of the BSE LargeMid (60:40) Stable Dividend 50 Total Return Index. |
| Benchmark | BSE LargeMid (60:40) Stable Dividend 50 Total Return Index. |
| Risk Level | Very High (Scheme and Benchmark). |
| Market Listing | Proposed to be listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). |
| Exit Load | NIL for units sold through the secondary market on NSE & BSE. |
| Expense Structure | Maximum Base Expenses Ratio (BER) is capped at 0.90% of daily net assets. |
The scheme information document has been prepared in accordance with SEBI (MF) Regulations, and a Due Diligence Certificate has been submitted by the CEO of Edelweiss Asset Management Limited.
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