nifty bees(n)1
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Nifty BeES
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Only Mutual Fund in India with exclusive focus onquantitative and passive investment management
Monitored by Securities and Exchange Board of India
(SEBI)
Managed proactively by the Trustees, separate from the
Asset management firm
Trustees meet compulsorily once in 2 months and report to
SEBI every quarter
The Compliance Officer reports independently and directly
to the Trustees bi-monthlyBenchmark
Benchmark is also regulated by the National Stock Exchange of India
rules and bye laws
The securities and other assets of the Fund are held by ABN AMRO
About Benchmark
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First Exchange Traded Fund (ETF) in India
Combination of a share and a mutual fund unit
Real-time Trading on NSE
Real-time Indicative NAV on www.benchmarkfunds.com
Available across 4000 NSE terminals in 400 cities
Tracks the S&P CNX Nifty Index
Priced at 1/10th of the Nifty Index
Investment management fees is 0.35% and the total expenseratio is 0.80% per annum, the lowest in India
Structured as a Mutual Fund under the SEBI 1996regulations
Introduction to Nifty BeES
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First ETF came in 1993 on S&P500 called SPDRs
SPDRs and QQQs (ETF on Nasdaq 100) are the most actively
traded ETFs
Globally, there are currently 348 ETFs managed by 43
managers across 31 exchanges.On February 28 , 2005 the ETF market globally was $313.60
billion ( Source: MSDW )
ETFs launched across the world include Japan in September
2001 and in Korea and Singapore in 2002Nearly 60% of trading volumes on American Stock Exchange
comprises of ETFs
History of ETFs
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S&P CNX Nifty Index
India¶s premier benchmark index introduced in November1995 and was developed as a basis for introducing index basedderivatives
Only companies having a high degree of liquidity defined interms impact cost are included as constituents of the Index
Nifty is calculated using the market capitalisation weightedmethod
Impact cost of the S&P CNX Nifty is 0.10% for a portfolio sizeof Rs.5 million
Represents about 66% of total market capitalisation
Correlation with Morgan Stanley Capital International(MSCI) India Index is about 97% over last 3 years
Attracts most of the Futures of over $ 1 bn daily. Theunderlying trades over $ 1.2 bn daily.
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ETFs Growth - Global
Source: Bloomberg, Morgan Stanley Research
Growth of International ETF
-
100,000
200,000
300,000
050100
150200
250
300350
Assets No. Of ETF
Assets 811 1,121 2,302 5,268 8,234 17,596 39,605 74,337 104,80 141,62 212,01 247,96
No. Of ETF 3 3 4 21 21 31 33 92 202 280 282 318
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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How Nifty BeES work
Secondary market
Seller
Buyer
NSE
Nifty BeESCash
Nifty BeESCash
Primary market
Buy / sell
Market making /
Arbitrage
Fund
Authorised
Participants /
Financial
Institutions
Creation
in-kind
Redemption
in-kind
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ETF Liquidity
FuturesFutures
Underlying EquityUnderlying Equity
(Creation / Redemption(Creation / Redemption
Process)Process)
IntraIntra--dayday
Buy/SellBuy/Sell
ETFETFLiquidityLiquidity
The notional liquidity of an E TF is t he average
volume of t he underlying.
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Nifty BeES Advantages
Simple ± Can be bought/ sold on NSE like a share«real-time
Economical ± No load scheme. Annual expense one of the lowest
for any mutual fund scheme in India.
Diversification ± It¶s a cost efficient way to invest in a basket of
securitiesEquitable Structure ± Long term investors insulated from short
term trading activity
Transparent ± Investors have access to information on the
portfolio constituents represented represented on a daily basis
Premium/Discount to NAV ± Between +&-0.5%(Source: Business Standard)
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NSE SYMBOL : NIFTYBEES
ISIN: INF732E01011
Reuters ± NBES.NS
Bloomberg ± NBEES.INMoneyline Telerate ± IN;NBFN
TOTAL EXPENSE RATIO:
0.80% (upto Rs.1000 mn)
0.70% (next Rs.4000 mn)
0.65% (over Rs.5000 mn)
ENTRY/ EXIT LOAD: NIL
Nifty BeES Details
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Tracking Error
Source: www.mutualfundsindia.com
Annualized Six-month Tracking Error (TE) calculated as on July 08, 2004
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00%
LIC MF Index Fund - Nifty Plan - Grow th
HDFC Index Fund - Nifty Plan
PRINCIPAL Index Fund - Grow th
Prudential ICICI Index Fund
Franklin India Index Fund - NSE Nifty Plan - Dividend
Tata Index Fund - Nifty Plan - Option A
Birla Index Fund - Grow th
Tata Index Fund - Nifty Plan - Option B
UTI Nifty Fund
SBI Magnum Index Fund - Grow th
Junior BeES
Nifty BeES
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Nifty BeES vs. Open ended Index funds
Attribute Nifty BeES Traditional Open
Ended Index Funds
Traded throughout the day Yes No
Low Expense Ratio Yes No
Trade at any brokerage firm Yes No
Hedging Tool Yes No
Ability to lend units Yes No
Tracking Best Average
NAV Indicative Real time Daily
Liquidity Fund / Stock market Fund
Structure Insulates long term
investor from short term
trading activity
Does not insulate
long term investors
from short term
investor activity
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³ Nifty BeES seems the best index fund when it comes to all three
parameters; Entry loads, Expense ratios and Tracking Error.It is
India¶s first and only Exchange Traded Fund or simply put, a next
generation index fund.´
- Business World, September 30, 2002
³Investing in Nifty BeES is a comparatively better method of
participating in any market rally´- The Economic T imes, December 2, 2002
Independent Research Review
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THANK YOU