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One mutual fund that ought to be in the portfolio of any investor who is seeking diversification from the Indian markets is MOSt Shares Nasdaq-100 ETF. Launched in 2011, the fund, which tracks the Nasdaq-100 Index, has given an impressive return.
The Nasdaq-100 includes some of the world’s most promising non-financial securities listed on the Nasdaq Market. It features global recognised names such as Apple, Microsoft, Amazon, Facebook and Alphabet.
The scheme has delivered an impressive return of 21 per cent over a five-year period and 18.8 per cent in a three-year period. This year, so far, it has produced 16.01 per cent, with many of the stocks it owns hitting new highs on the Nasdaq.
Liquidity concerns
Many Indian investors may be keen to own a piece of MOSt Shares Nasdaq-100 ETF. However, it is not that easy to accumulate a sizeable quantity of MOSt Shares Nasdaq-100 ETF due to a variety of reasons. The fact that it only managed assets worth ₹74.18 crore (as of February-end) indicates the high entry barriers for investors, especially retail ones.
The biggest concern is liquidity of the units on the exchange. The counter is hardly visible on the BSE, and on the NSE just a few hundred units are changing hands. Usually, buyers outnumber sellers on the NSE platform by a huge margin. This creates hurdles for investors looking to buy the exchange-traded fund (ETF).
Besides, this ETF often trades at a premium to its NAV in the secondary market. While the NAV of the ETF is currently ₹471.74 on the NSE, its quoted price closed at ₹564.86, a good 20 per cent premium. Most of the days, the price is at a premium of over 15 per cent with respect to the NAV, resulting in a bigger hole in investors’ pockets.
So, can you buy directly from the fund house at the NAV? Yes, but the big barrier is that investors can buy and sell units of the scheme only in the creation unit size of 1,00,000. This is based on the valuation of the 100 stocks quoting on the Nasdaq. This means that at the current NAV, one has to have at least ₹4.7 crore to buy such units!
Have market makers
How can the fund address these issues? The fund house could explore market makers to perk up trading volumes on the counter in consultation with exchanges.
To attract investors and enhance liquidity, the fund house could consider launching a follow-on offer of MOSt Nasdaq-100 ETF. However, the moot question is whether Motilal Oswal has the wherewithal on its own to reach out to the masses, given the restriction on distributors’ commission. As this is a nuanced product, definitely distributors can help in highlighting the features of the scheme.
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