Edelweiss Mutual Fund has announced the merger of two of its passively managed schemes. Edelweiss ETF-Nifty Bank (ENB) will merge with Edelweiss Nifty Largemidcap 250 Index Fund (ELM250), the fund house wrote to its unitholders. The record date for the merger is August 7, 2023.
ENB is an open-ended scheme tracking Nifty Bank Index and ELM250 is an open-ended equity scheme replicating Nifty LargeMidcap 250 Index managing assets worth Rs 2 crore and Rs 50 crore, respectively as on May 31, 2023. While the former has given 35 percent returns the latter has given 26.4 percent returns in one year ended July 3, 2023, as per Value Research.
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“Considering the AUM of ENB and given very minimal trading volumes on the exchange it is prudent to merge ENB with ELM250 to provide more liquidity to investors in ENB,” the fund house said in a letter to unitholders explaining the rationale behind the merger.
Focus on index funds
The fund house sees index funds as a more efficient means to invest in stocks over ETFs due to reduced impact cost on transactions, no brokerage and ability to invest without a demat account, among other benefits. Index funds also allow inflows through systematic investment plans, which may not be possible with ETFs.
“Opportunities in BFSI can be better tapped in an active strategy. Investors have the option to continue their investments in Edelweiss Nifty Large Midcap 250 Index fund, which is one of the most difficult indices to beat for active schemes investing in this space. It gives equal exposure to large and midcap segments with auto rebalance every quarter,” said Niranjan Avasthi, SVP and Head-Product, Marketing and Digital, Edelweiss Asset Management.
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The fund house has been focusing on index funds instead of ETFs while building a passive investing portfolio in equities. In the last one year it has launched index funds tracking indices such as Nifty Smallcap 250 Index, Nifty Next 50 Index and Nifty Midcap150 Momentum 50 Index. In September 2021, the fund house also converted the ETF tracking Nifty 50 into Edelweiss Nifty 50 Index Fund and ETF tracking Nifty 100 Quality 30 ETF into Edelweiss Nifty 100 Quality 30 Index Fund.
Since the two schemes are merging, investors are offered an exit option for a period from July 6, 2023, to August 4, 2023 (both days inclusive), as per the rules. Both these schemes do not charge any exit load. Investors can remain invested if they are in agreement with the merger, which does not attract any tax liability for the investors due to merger.
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